ILS Bermuda http://www.ilsbermuda.com Access to the latest information from global leaders in the ILS market in Bermuda Tue, 20 Aug 2019 17:15:23 +0000 en-US hourly 1 https://wordpress.org/?v=5.2.2 Climate risk data needs linking to insurance & risk-transfer process http://www.ilsbermuda.com/news/climate-risk-data-needs-linking-to-insurance-risk-transfer-process/ Mon, 19 Aug 2019 19:04:54 +0000 http://www.ilsbermuda.com/?p=4913 Climate risk data should be linked to the insurance, reinsurance and risk transfer process through the use of technology and risk models, placing it and […]

The post Climate risk data needs linking to insurance & risk-transfer process appeared first on ILS Bermuda.

]]>

Climate risk data should be linked to the insurance, reinsurance and risk transfer process through the use of technology and risk models, placing it and financial products at the heart of climate adaptation and resilience efforts.

A new background paper from academics and insurance sector specialists highlights the importance of continued collaboration between the re/insurance and risk transfer industry with state policy makers.

This should include more investment in open-source risk models, the academic work suggests, which alongside greater collaboration can improve society’s ability to recover from disasters linked to climate change.

The paper is not groundbreaking, but it serves as another important reminder that insurance and more broadly risk transfer, including insurance-linked securities (ILS), have a vital role to play in helping to enhance resilience and society’s ability to respond to climate related disasters.

It has always been our view that by leveraging climate data (and weather or catastrophe data) and improving our understanding of it using advanced technology such as risk models, financial products can become more responsive and better linked to the reality of our climate, environment and lives today.

Insurance, reinsurance, ILS and risk transfer are a set of hedging tools that can provide financial protection and smooth climate related financial volatility, for governments, corporations, communities and people across the globe.

But in order to better link the outcomes of financial protection with the climate related risks they are designed to protect us against, work to better integrate risk transfer into our adaptation and resilience efforts is required.

Putting data at the heart of these efforts is vital, in our view.

The paper’s authors highlight the need for society to:

1. Invest in open-source models that provide a long-term view of climate risk and link to insurance solutions.

2. Joined-up policy-making to put climate-risk models at the heart of national adaptation strategies.

3. Develop consistent climate adaptation regulation and standards across countries.

4. Foster insurance innovations that can respond to a changing climate risk landscape.

5. Strengthen dialogue between insurers and policy-makers around Build Back Better.

6. Converge insurance, humanitarian and development agendas.

7. Promote and invest in risk literacy throughout society

The paper’s first recommendation is that improved risk data and analysis of the impact of climate change will enable modelling of the frequency and severity of climate events, as well as the potential financial losses attributed to them.

“The data should then be modelled according to differing projections of the rate of climate adaptation: in other words, by different estimates of how much the vulnerability of the natural and built environment may have been reduced, over various periods of time,” the authors explain.

“This will ensure that climate risk data, covering both a near-term and long-term view of climate adaptation, can be linked to insurance and the risk-transfer process.”

They recommend that risk models created with the data remain open and widely available, rather than proprietary and closed to many outside of specialist industries such as insurance.

“This will ensure that they can be used to support public and private insurance mechanisms, including the piloting of insurance innovations, without the pressure to recoup costs from commercial transactions,” explained lead author of the paper Professor Paula Jarzabkowski.

Additionally she commented, “We need joined-up policy-making between treasury, environment and disaster-management divisions within government. These divisions must also work collaboratively with development agencies to put climate risk data at the heart of national adaptation strategies.”

The paper also calls for consistent international standards for climate adaptation regulation, which the authors say could be established by the International Monetary Fund or a similar supra-national actor.

Explaining, “Consistency across countries is important as sound climate-risk insurance typically requires an appropriate balance between retaining risks in-country, and transferring to globally diversified international markets.”

Going back to basics on climate risk transfer, addressing issues within the insurance product itself, to create something more responsive and in tune with the way lives and businesses work today can produce better outcomes, we believe.

Making the climate risk transfer product set data-driven and informed by advanced risk models is a key part of this process.

As too are a focus on cost and efficiency, to deliver climate risk transfer and insurance products more accessible and effective for all.

This paper sets out a good intro to many of the issues that hold back development and broader adoption of climate risk transfer tools, including insurance and reinsurance, providing advice that industry and policymakers alike will want to explore.

To read more articles like this one, visit Artemis.

The post Climate risk data needs linking to insurance & risk-transfer process appeared first on ILS Bermuda.

]]>
Apex commits to ESG http://www.ilsbermuda.com/news/apex-commits-to-esg/ Fri, 26 Jul 2019 14:48:58 +0000 http://www.ilsbermuda.com/?p=4894 Bermudian-based global financial services provider Apex Group Ltd has signified its commitment to become a leader in the ESG (environmental, social and governance) investment services space. Apex has announced the launch of a new ESG data and rating service, Apex GreenLight ESG Ratings, and has appointed a global head of […]

The post Apex commits to ESG appeared first on ILS Bermuda.

]]>
Bermudian-based global financial services provider Apex Group Ltd has signified its commitment to become a leader in the ESG (environmental, social and governance) investment services space.

Apex has announced the launch of a new ESG data and rating service, Apex GreenLight ESG Ratings, and has appointed a global head of ESG product to drive development.

As Apex continues to expand its capabilities to meet client demand across financial services the launch of GreenLight demonstrates the firm’s ongoing focus on ESG innovation, the company said. GreenLight will deliver an in-house developed ESG rating evaluating privately held companies globally, unlocking unique market intelligence and delivering unprecedented access to a previously opaque asset class.

Amara Goeree has been appointed as the group’s global head of ESG product and will lead the firm’s product development and go-to-market strategy, the company said. Ms Goeree is a sustainability specialist with almost a decade’s experience in ESG innovation within financial services.

Most recently, she was head of corporate sustainability and responsible investment at Julius Baer, the private bank. She also acted as deputy head of the team leading the ESG ratings process for the Dow Jones sustainability index at RobecoSAM AG.

To further show its commitment to ESG, Apex is currently in the process of becoming a UN Principles for Responsible Investment signatory, the company said.

Peter Hughes, founder and chief executive officer of Apex Group Ltd, said: “This product builds on our leading position in the private equity and real estate administration sector where data analytics is one of our key differentiators. GreenLight will deliver insights into private companies that investors were unable to access previously.”

He added: “For Apex, this product is just the start of the ESG revolution we hope to pioneer across financial services, enabling us to make a positive impact on the world. We envision a future in which a company’s ESG score is as important as its credit score.”

Ms Goeree said: “Over the course of my career, I’ve seen ESG and sustainable finance develop from a niche and conviction-based topic into a top priority for all investment firms.

“This new framework will pave the way for all types of companies, across all industries, to understand and accurately assess their ESG contribution.”

Established in Bermuda in 2003, Apex has more than 40 offices worldwide and 3,000 employees. The company has a broad range of clients spanning asset management, allocators and financial institutions.

The post Apex commits to ESG appeared first on ILS Bermuda.

]]>
Arch’s record $701m mortgage ILS puts it at “forefront of managing capital & risk” http://www.ilsbermuda.com/news/archs-record-701m-mortgage-ils-puts-it-at-forefront-of-managing-capital-risk/ Tue, 16 Jul 2019 14:44:54 +0000 http://www.ilsbermuda.com/?p=4891 The completion of Bermuda-based re/insurer Arch Capital Group Ltd.’s latest and largest mortgage insurance-linked securities (ILS) transaction seen to-date, a $701 million Bellemeade Re 2019-3 Ltd. shows […]

The post Arch’s record $701m mortgage ILS puts it at “forefront of managing capital & risk” appeared first on ILS Bermuda.

]]>
Arch Capital Group

The completion of Bermuda-based re/insurer Arch Capital Group Ltd.’s latest and largest mortgage insurance-linked securities (ILS) transaction seen to-date, a $701 million Bellemeade Re 2019-3 Ltd. shows the firm is at the “forefront” when it comes to managing capital and risk, an executive said today.

Arch Capital Group has become a significant user of capital markets backed reinsurance protection for its growing mortgage insurance book underwritten by Arch Mortgage Insurance (Arch MI).

Arch Capital has now successfully placed its third mortgage insurance-linked notes issuance of the year, tapping the capital markets to expand its collateralized mortgage reinsurance protection to now just under $4 billion.

Bellemeade Re 2019-3 Ltd. was established to issue four tranches of mortgage insurance-linked notes, each of which have now been priced and sold to institutional investors, with the proceeds used to collateralize underlying reinsurance agreements between the issuer and Arch Capital itself.

The transaction achieved its targeted size of $700.92 million, making this Bellemeade Re 2019-3 mortgage ILS transaction the largest from Arch to-date and also the largest mortgage ILS transaction we’ve recorded so far (details on all the mortgage ILS we’ve covered can be found here).

Commenting on the successful issuance, Jim Bennison, EVP, Alternative Markets for Arch Capital Group (U.S.) Inc., explained, “Since the inception of the Bellemeade ILN program, one of our goals has been to transfer a portion of the risk across the entire U.S. mortgage insurance portfolio, which we’ve now largely achieved.

“With over four billion dollars of aggregate reinsurance protection on our portfolio, we believe we’re at the forefront of managing capital and risk in the mortgage insurance industry.”

This is without a doubt the case, as Arch and its mortgage insurance subsidiaries have now issued close to $4.2 billion of mortgage ILS transactions across nine transactions (details on all the mortgage ILS we’ve covered can be found here), with still just a little under $4 billion of collateralized reinsurance still in-force from these catastrophe bond like deals.

We actually think the way Arch has set up its mortgage insurance business, to source risk efficiently and pass it off to the most appropriate capital, leveraging the capital markets and using technology as well, is a sign of the future for other lines of business.

Arch noted the transaction is the “the largest individual ILN ever conducted by a mortgage insurance company.”

The deal provides Arch with exactly $700,920,000 of indemnity reinsurance on a pool representing $49.6 billion of mortgages, with the portfolio of MI policies linked to 219,994 loans issued by Arch MI and affiliates in 2016.

Arch also disclosed the pricing of the four tranches of mortgage insurance-linked notes, explaining that the $222.809 million of class M-1A notes priced with a coupon of one-month LIBOR plus 110 basis points, the $278.511 million of class M-1B notes at LIBOR plus 160 basis points, the $176.39 million of class M-1C notes at LIBOR plus 195 basis points, and the $23.21 million of class B-1 notes priced at LIBOR plus 250 basis points.

You can read all about this new Arch sponsored Bellemeade Re 2019-3 Ltd. mortgage insurance-linked securities (ILS) transaction to our Deal Directory.

To read more articles like this one, visit Artemis.

The post Arch’s record $701m mortgage ILS puts it at “forefront of managing capital & risk” appeared first on ILS Bermuda.

]]>
Bermuda ILS related re/insurer registrations rose slightly in H1 2019 http://www.ilsbermuda.com/news/bermuda-ils-related-re-insurer-registrations-rose-slightly-in-h1-2019/ Tue, 16 Jul 2019 14:42:54 +0000 http://www.ilsbermuda.com/?p=4888 Registrations for new insurance and reinsurance vehicles that are related to catastrophe bonds and other insurance-linked securities (ILS) use-cases have risen slightly in the first-half […]

The post Bermuda ILS related re/insurer registrations rose slightly in H1 2019 appeared first on ILS Bermuda.

]]>
Bermuda reinsurance market

Registrations for new insurance and reinsurance vehicles that are related to catastrophe bonds and other insurance-linked securities (ILS) use-cases have risen slightly in the first-half of 2019.

This is promising for ILS, catastrophe bond and collateralized reinsurance market activity over the rest of the year, as despite the impacts of heavy catastrophe losses over 2017 and 2018, the ILS market continues to put in place the structures required to facilitate new issuance.

It’s also very encouraging for Bermuda, as well as the ILS market as a whole, given that other domiciles are beginning to house cat bond and collateralized reinsurance structures on a more regular basis as well.

In the first-half of 2019 Bermuda saw 32 re/insurer registrations in total, as well as registrations of 5 intermediaries.

In the prior year H1 of 2018, Bermuda saw slightly more re/insurer registrations, at 34, but only 1 intermediary vehicle was registered. In H1 2017 the totals were 23 re/insurers and zero intermediaries.

This reflects the continued growth of Bermuda’s insurance and reinsurance market as a whole, another encouraging statistic for the island.

But when it comes to the ILS and cat bond market, the statistics are even more encouraging.

In H1 2019 Bermuda saw 12 special purpose insurance (SPI) vehicles registered, static with H1 2018’s also 12 and slightly up on H1 2017’s 11.

But in addition, H1 2019 also saw the registration of one Class 3B reinsurance vehicle which is destined to write ILS business, where as there was no registrations of other re/insurer classes that we can specifically identify as ILS related in either of the H1’s of 2018 or 2017.

The Class 3B reinsurance vehicle that was registered in the first-half of this year was Newport Re Ltd., which as we revealed back in June is part of the infrastructure being setup by investment giant PIMCO for its new insurance-linked securities (ILS) operations.

However, it is important to note that there has been a slight reduction in the number of catastrophe bond SPI’s registered in Bermuda during the first-half, with more SPI’s for mortgage insurance-linked securities (ILS) established.

This likely reflects the ongoing fall-out from catastrophe losses and the slight slowdown in cat bond issuance that has been experienced as a result.

But for Bermuda’s economy and financial market growth, the fact it is attracting all of the mortgage ILS issuers so far is testament to the efficiency of its ILS and reinsurance market regulation and offerings, as well as the abundance of service providers on tap to assist.

It will be interesting to see how the second-half of the year goes, as often there is a glut of registrations towards year-end in time for the renewals and we could see more cat bond SPI’s registered at that time of the year, as well as some more reinsurance sidecar SPI’s as well.

To read more articles like this one, visit Artemis.

The post Bermuda ILS related re/insurer registrations rose slightly in H1 2019 appeared first on ILS Bermuda.

]]>
ILS has beneficial impact on society & quality of life: John Seo, Fermat Capital Management http://www.ilsbermuda.com/news/ils-has-beneficial-impact-on-society-quality-of-life-john-seo-fermat-capital-management/ Thu, 11 Jul 2019 14:40:27 +0000 http://www.ilsbermuda.com/?p=4885 Underpinned by innovative catastrophe bond transactions and increased awareness and understanding of sustainable and ethical investing, the insurance-linked securities (ILS) space is more than just […]

The post ILS has beneficial impact on society & quality of life: John Seo, Fermat Capital Management appeared first on ILS Bermuda.

]]>
John Seo, Fermat Capital Management

Underpinned by innovative catastrophe bond transactions and increased awareness and understanding of sustainable and ethical investing, the insurance-linked securities (ILS) space is more than just a portfolio-enhancing asset class.

This is according to John Seo, the Co-founder and Managing Director of specialist ILS manager Fermat Capital Management. In a recent article for GAM Investments, Seo explains that while the ILS space benefits from being fundamentally uncorrelated with the broader market, as an asset class, it brings more than just portfolio-enhancing qualities.

“By providing structural capital to the global re/insurance industry to set against the possibility of rare but damaging catastrophes, ILS arguably have a measurable beneficial impact on society and the quality of people’s lives.

“Investors are increasingly considering the positive environmental, social and governance (ESG) qualities of ILS, particularly when they are used by public institutions as tools to help manage risk and to support better disaster preparedness and response to communities at risk of natural disasters,” said Seo.

Catastrophe bonds, one of the largest sub-sectors of the ILS space, were introduced to cover very peak exposures, often sitting at the top of reinsurance towers to mitigate the impacts of the most extreme natural catastrophe events.

Over time, and assisted by the increased sophistication and maturity of the ILS community, cat bonds have started to move further down the tower, supplementing traditional reinsurance coverage in a different way than before and ultimately being more widely leveraged across both the traditional reinsurance, and primary insurance space.

The ILS asset class has grown rapidly over the last five or six years and continues to reach new heights, something that’s supported by innovative cat bond transactions that not only provide diversification and uncorrelation benefits for investors, but that also play a very important role in the ability of societies and economies to both prepare for and recover from natural disasters.

As an example, Seo discusses the $320 million IBRD CAR 111-112 catastrophe bond transaction, that provides financial backing and insurance protection to the World Bank’s Pandemic Emergency Financing Facility (PEF).

The bond provides parametric protection tied to the occurrence of specific pandemics, such as Ebola and influenza, providing liquidity and capital to assist stricken countries or regions in their response and recovery efforts.

“From a narrow financial perspective, the beneficial impact of this bond is considerable because early action funding has a multiplier effect: one US dollar spent on containment early in the stages of a breaking pandemic is worth over one hundred US dollars of treatment later, when traditional, international aid tends to arrive,” says Seo.

Investing in a sustainable, responsible and ethical manner is becoming of increased importance for investors in the ILS space, a trend supported by the fact the Bermuda Stock Exchange (BSX) is pushing the ILS asset class as one that has ESG investment qualities.

At the same time, investors in the space are reportedly asking about climate change and ESG investing more and more.

“Climate change has not yet manifested itself in an increased frequency of hurricanes – this has been acknowledged by the Intergovernmental Panel on Climate Change (IPCC)3 , which provides the official global scientific view on climate change impact on weather – although investors in this market continue to monitor events and check their models for any potential change in activity.

“Changes that could impact in the underlying (re)insurance risks could be due to an uptick in frequency or severity of weather-related catastrophes, but are more likely due to more powerful underlying issues that can exacerbate losses – namely, increasing concentrations of property and wealth in areas more prone to natural disasters, like coastlines and wildland-urban interfaces,” explains Seo.

He continues to explain that while events like the 2018 California wildfires were devastating to those communities affected, they often only have a minimal impact on portfolios. However, more recent wildfire events have provided important data points to test prevailing models, which might well result in attractive investment opportunities.

“Initial evaluations provisionally indicate that California wildfire models likely need to double the risk in some areas of the state, primarily due to climate-related, increased flammability of forested areas,” says Seo.

ILS are becoming an increasingly important source of risk transfer and risk funding, assisting organisations and in some instances governments’ efforts to remove natural catastrophe risk from their balance sheets, while freeing up their own funds for resilience and response needs.

To read more articles like this one, visit Artemis.

The post ILS has beneficial impact on society & quality of life: John Seo, Fermat Capital Management appeared first on ILS Bermuda.

]]>
Artemis Bermuda ILS Executive Roundtable 2019 http://www.ilsbermuda.com/news/artemis-bermuda-ils-executive-roundtable-2019/ Thu, 27 Jun 2019 13:52:06 +0000 http://www.ilsbermuda.com/?p=4729 Welcome to Artemis’ fourth ILS executive roundtable in Bermuda, in which our participants discussed a variety of opportunities and challenges that the reinsurance and insurance-linked securities […]

The post Artemis Bermuda ILS Executive Roundtable 2019 appeared first on ILS Bermuda.

]]>
Artemis

Welcome to Artemis’ fourth ILS executive roundtable in Bermuda, in which our participants discussed a variety of opportunities and challenges that the reinsurance and insurance-linked securities (ILS) sector is dealing with as it responds to the losses of a second active year for global catastrophes.

Against a backdrop of continued loss creep and a lack of fresh capital in the market, the roundtable’s initial conversations focused on pricing conditions and the potential for rate increases.

Participants also looked at how investors were responding to the prolonged period of losses across reinsurance, and highlighted some areas where there was renewed interest and new asset managers looking to enter into the sector.

They also pointed to a need for more transparency and consistency in the modelling process as a way to increase investor confidence, and debated the pros and cons of implementing standardised valuation practices.

Bermuda’s position in the market was also a point of discussion, as speakers analysed the BMA’s new regulatory ‘sandbox’ project, and compared it with the schemes developed by some of the other leading ILS jurisdictions.

There was some consensus that Bermuda’s status as an established ILS market, as well as its innovative regulatory efforts, would continue to prove more valuable to the industry in the long-term than some of the riskier incentives offered by competing jurisdictions.

The conversation came to a close as participants considered some potential opportunities for the market to expand its remit in future. These included a focus on new areas of original risk, such as cyber reinsurance, as well as the possibility of off-cycle contract renewals.

Thank you to our Roundtable partners: Appleby, Estera and Property Claim Services (PCS).

Download your copy of the Artemis Bermuda Executive Roundtable 2019.

Download copies of all of our Executive Roundtable reports here.

To read more articles like this one, visit Artemis.

The post Artemis Bermuda ILS Executive Roundtable 2019 appeared first on ILS Bermuda.

]]>
ILS Bermuda Announces Kevin O’Donnell As Industry Keynote Speaker For Convergence 2019 http://www.ilsbermuda.com/news/featured/ils-bermuda-announces-kevin-odonnell-as-industry-keynote-speaker-for-convergence-2019/ Tue, 25 Jun 2019 15:45:34 +0000 http://www.ilsbermuda.com/?p=4724 ILS (Bermuda) Ltd., organisers of Bermuda Convergence 2019, today announced that Kevin O’Donnell, President and CEO of RenaissanceRe Holdings Ltd., will be the event’s industry keynote speaker on Thursday, October 10th. Mr. O’Donnell has served as Chief Executive Officer of RenaissanceRe since July, 2013 and as President since November, 2012. […]

The post ILS Bermuda Announces Kevin O’Donnell As Industry Keynote Speaker For Convergence 2019 appeared first on ILS Bermuda.

]]>
ILS (Bermuda) Ltd., organisers of Bermuda Convergence 2019, today announced that Kevin O’Donnell, President and CEO of RenaissanceRe Holdings Ltd., will be the event’s industry keynote speaker on Thursday, October 10th.

Mr. O’Donnell has served as Chief Executive Officer of RenaissanceRe since July, 2013 and as President since November, 2012. He is responsible for the oversight and management of the Company’s reinsurance and insurance businesses. 

Prior to becoming President of RenaissanceRe Holdings Ltd., Mr. O’Donnell served as Executive Vice President and Global Chief Underwriter from 2010. He acted as President of Renaissance Reinsurance Ltd. from 2005, overseeing the Company’s reinsurance lines, including Property and Casualty & Specialty reinsurance, as well as its joint ventures. Mr. O’Donnell has served as Chief Underwriting Officer for the Company’s key joint ventures, Top Layer Re and DaVinci Re. In 2009, he directed the launch of RenaissanceRe Syndicate 1458 at Lloyd’s. Mr. O’Donnell has been with the Company since 1996, when he joined to lead the International Underwriting and Ceded Reinsurance businesses.

Prior to joining RenaissanceRe, Mr. O’Donnell was a Vice President of Centre Financial Products, Ltd., and an underwriter at SCOR. 

In January 2017, Mr. O’Donnell was appointed as Vice-Chair of the Global Reinsurance Forum, subsequently assuming the role of Chair in June, 2018. In 2017 and 2018, he served as Chairman of the Association of Bermuda Insurers and Reinsurers (ABIR). Mr. O’Donnell holds a Bachelor of Arts degree in Economics from Hamilton College and an M.B.A. from New York University’s Stern School of Business.

Various topics related to investing in ILS and the state of the market featuring senior executives from the ILS community will follow Mr. O’Donnell’s keynote presentation.

Kathleen Faries, ILS Bermuda Chair, said: “On behalf of ILS Bermuda, I am very pleased to announce that well known industry veteran Kevin O’Donnell will give this year’s industry keynote address.  He is a well-known leader in the reinsurance arena and his insight into the rapidly changing world of risk transfer are always welcomed by our industry. What’s clear is that entities across the world are increasingly looking to reinsurance and ILS to mitigate risks associated with natural catastrophes and climate risk and Bermuda’s companies are at the forefront of this new paradigm.  We are delighted to welcome Kevin and look forward to hearing his views on the market.”

More than 300 delegates are expected to attend the seventh annual Convergence event to be held at the Hamilton Princess Hotel on October 9th to 11th. The event continues to grow and attract delegates from more than a dozen countries to network at a unique event covering the alternative reinsurance, insurance linked securities (ILS) and collateralised reinsurance landscape.

This year’s event promises an exciting line-up of speakers and ‘Bermuda Shorts’ topics including: Climate: Perspectives from Science; Climate: Perspectives from Industry; Investing in ILS; The State of the Market and Emerging Opportunities.

Tim Tetlow, Deputy Chair and spokesperson for ILS Bermuda’s Thought Leadership and Education team said: “I echo Kathleen’s excitement at Kevin O’Donnell giving our Industry Keynote speech. Kevin and RenaissanceRe have been at the forefront in developments in catastrophe risk transfer practices for over two decades and have recently enhanced their global reinsurance leadership with the acquisition of Tokio Millennium Re. I look forward to hearing Kevin’s perspective on the industry and its future.”

The post ILS Bermuda Announces Kevin O’Donnell As Industry Keynote Speaker For Convergence 2019 appeared first on ILS Bermuda.

]]>
ILS market at “exciting inflection point” – John Seo, Fermat Capital Management http://www.ilsbermuda.com/news/ils-market-at-exciting-inflection-point-john-seo-fermat-capital-management/ Wed, 05 Jun 2019 16:25:47 +0000 http://www.ilsbermuda.com/?p=4718 Poised to reach new heights in the coming months on the back of bumper year’s of catastrophe bond issuance, the insurance-linked securities (ILS) market is […]

The post ILS market at “exciting inflection point” – John Seo, Fermat Capital Management appeared first on ILS Bermuda.

]]>
John Seo, Fermat Capital Management

Poised to reach new heights in the coming months on the back of bumper year’s of catastrophe bond issuance, the insurance-linked securities (ILS) market is at “an exciting inflection point,” says Co-founder and Managing Director of Fermat Capital Management, John Seo.

In spite of the impacts of the catastrophe events that occurred in 2017 and 2018, subsequent losses and issues of trapped collateral, the ILS market has continued to expand in recent times, albeit at a somewhat reduced pace when compared with previous years.

Reports on the overall size of the ILS market at the end of 2018 do vary. However, the general consensus from insurance and reinsurance brokers is that even with the inclusion of trapped collateral, the market grew once again in 2018, and is approaching the $100 billion mark.

In a recent article for asset manager GAM Investments, Seo of specialist ILS investment manager Fermat Capital who manage catastrophe bond portfolios for GAM funds, discussed the market’s impressive expansion.

“We believe the ILS market has reached an exciting inflection point. Although the asset class may still be relatively under the radar, it has been around for 20 years and in 2019 is set to top a key milestone: a market size that exceeds the USD 100 billion mark, providing around 20% of total available global reinsurance capacity,” said Seo.

Referencing re/insurance broker Aon’s total ILS market size of $97 billion as at the end of 2018, which represents growth of 9% from the $89 billion Aon recorded at the end of 2017, Seo’s expectation that the market will surpass the $100 billion is pretty much a certainty.

As noted previously, ILS market size figures do differ for a variety of reason and, is evidenced by the fact JLT Re’s 2018 year-end ILS market size of $91 billion is $6 billion lower than Aon’s.

At the same time, the Artemis ILS Investment Managers & Funds Directory shows that at $103 billion, the combined ILS assets under management (AuM) of managers and funds in the space has already surpassed the $100 billion mark.

But regardless of the difference in year-end figures, which may in part be a result of trapped collateral, it’s clear that even when alternative, or third-party reinsurance capital growth decelerates, its ability to consistently outpace the growth of the traditional market has ensured that ultimately, it’s claiming a larger and larger slice of the overall reinsurance market pie.

The ILS market is composed of numerous sub-sectors, with the largest being the collateralised reinsurance space, followed by the catastrophe bond market.

In 2018, full-year catastrophe bond issuance broke records at $13.9 billion, a figure that becomes more impressive when taking into account the impacts of 2017 catastrophe events and the subsequent trapped collateral issue, and also the fact 2017 issuance itself was a record at more than $12.5 billion, according to Artemis’ data.

As well as issuance levels reaching new heights, the ILS market also expanded its remit in 2018 and featured new perils and regions, including collaboration between Pacific Alliance countries and the World Bank to provide earthquake protection to Chile, Colombia, Mexico, and Peru, and also the first use of the capital markets by FEMA, transferring flood risk on behalf of the NFIP.

“These are exciting developments for the market which underscore that demand for capital in this asset class has not been invented as a solution for investors: rather it is responding to critical and growing need from the re/insurance industry and from society as a whole.

“In our view, as the market becomes more supply driven over the coming years, the investor base should widen further. And for providing this structural capital solution to support the growth and efficient functioning of the global re/insurance marketplace, and therefore the world’s economies and societies, ILS investors could be rewarded with attractive and uncorrelated risk-adjusted returns,” said Seo.

The Artemis Deal Directory and first-quarter cat bond and ILS market report shows that issuance levels have remained strong in the opening three months of the year, at $2.8 billion. While issuance as of the end of May, 2019 stands at roughly $5.5 billion (including mortgage insurance-linked issuances).

Industry commentary has predicted that the ILS market would again likely regain momentum in 2019 after a slower growth period in 2018, and market dynamics suggest that the $100 billion mark will be surpassed in the coming months as the sponsor and investor base continues to expand and look to push the boundaries of the asset class.

To read more articles like this one, visit Artemis.

The post ILS market at “exciting inflection point” – John Seo, Fermat Capital Management appeared first on ILS Bermuda.

]]>
Business leaders welcome blacklist decision http://www.ilsbermuda.com/news/business-leaders-welcome-blacklist-decision/ Fri, 17 May 2019 19:50:57 +0000 http://www.ilsbermuda.com/?p=4700 Bermuda’s international business sector today applauded the decision by European Union to remove the island from its tax blacklist. The EU’s Economic and Financial Affairs […]

The post Business leaders welcome blacklist decision appeared first on ILS Bermuda.

]]>
Bermuda’s international business sector today applauded the decision by European Union to remove the island from its tax blacklist.

The EU’s Economic and Financial Affairs Council today confirmed at a meeting in Brussels that the island is no longer on the list of noncooperative jurisdictions on tax matters.

“We applaud today’s decision and appreciate the expedited review by Ecofin,” said Stephen Weinstein, deputy chairman of the Bermuda Business Development Agency.

“We’re thankful for the efforts of our Premier and Finance Minister to engage with the EU and provide transparency into Bermuda’s world-class regime. Our jurisdiction’s updated regulatory and legislative framework mirrors existing practices in our international business market, exemplifying the highest standards of compliance and economic substance. It’s important that markets worldwide have access to Bermuda’s leading expertise and capacity.”

Roland “Andy” Burrows, the BDA’s CEO, said: “Bermuda can be proud of our market’s long-respected record on compliance and tax-transparency — the island remains a jurisdiction of choice for reputable businesses.

“Today’s decision is the right one, and we welcome it as a testament to the top-tier reputation we’ve worked hard to build over many decades.

“We thank the government for its pro-active response, as well as the regulator and all our industry stakeholders.”

Bermuda’s stock exchange and industry associations, representing sectors ranging from re/insurance, captive insurance, trusts and family offices to asset management and local companies, all echoed those comments and welcomed the EU decision.

Craig Bridgewater, chairman of the Alternative Investment Management Association network in Bermuda, said: “On behalf of the AIMA network in Bermuda, we are delighted Ecofin has seen fit to remove Bermuda from the list of non-cooperative jurisdictions for tax purposes. Bermuda has always sought to adhere to the highest standards of tax transparency and other global regulatory standards and sees this quality as a key aspect of the manner in which it conducts business presently and into the future.”

Leah Scott, president of the Bermuda Association of Licensed Trustees, said: “Bermuda has consistently demonstrated its commitment to combating money laundering and terrorist financing.

“On behalf of the trust Industry, I can say we are pleased with the Bermuda Government’s efforts to resolve this issue, and remain confident that Bermuda can, in quick order, resume enjoying the benefits of being recognised by the EU as co-operative international financial centre.”

Patrick Tannock, chairman of the Association of Bermuda International Companies, said: “ABIC welcomes the confirmation that Bermuda has been removed from the EU list of non-cooperative tax jurisdictions. We applaud all involved in bringing this to fruition and are committed to working collaboratively with government and industry stakeholders to ensure that Bermuda remains a leading reputable international business jurisdiction.”

Albert Benchimol, chairman of the Association of Bermuda Insurers and Reinsurers, said: “On behalf of the entire business community, we express our appreciation to Premier Burt, finance minister Curtis Dickinson and Bermuda Monetary Authority chairman Jeremy Cox for immediately and effectively marshalling resources to demonstrate Bermuda’s long-standing tradition and commitment to meet and exceed international standards. Thank you, as well, to the European Union Economic and Financial Affairs Council for their continued engagement with Bermuda.”

Sylvia Oliveira, director of the Bermuda International Long Term Insurers and Reinsurers, said: “Biltir members are proud to work in an insurance-friendly jurisdiction that is both Solvency II equivalent and NAIC-qualified. While being placed on Ecofin’s list of non-cooperative tax jurisdictions was disappointing, Biltir members were confident Bermuda would be removed from the list at the earliest opportunity. We are confident our government officials will continue to work with the EU to meet all compliance standards, demonstrating Bermuda’s longstanding reputation for transparency and regulatory leadership.”

Kathleen Bibbings, of the Bermuda International Management Association, said: “Bima is pleased Bermuda has been removed from the EU list of non-cooperative jurisdictions for tax purposes. The decision today by the European Union recognises Bermuda’s commitment to full compliance and tax transparency.”

Greg Wojciechowski, CEO of the Bermuda Stock Exchange, said: “Removal from this list is a testament to Bermuda’s commitment to meet and exceed international standards of regulatory compliance. This development also serves to underscore the seriousness Bermuda places on being a strong partner in the global regulatory and commercial fabric.

“At the BSX, we share this view and work regularly with international regulators and market practitioners to ensure our operating platforms are in line with global standards. This is clearly evident in the fact the BSX is a full member of the World Federation of Exchanges and a member of the Board of Directors of that organisation.”

Kendaree Burgess, CEO of the Bermuda Chamber of Commerce, said: “The Bermuda Chamber of Commerce is appreciative of the swiftness of the Ecofin group in altering Bermuda’s status and removing Bermuda from the list of non-cooperative jurisdictions. We also want to recognise all the behind-the-scenes work by our government and industry partners in making sure we spoke and acted in a cohesive manner.

“The Chamber believes this latest move speaks to Bermuda’s history and long track record of compliance and transparency.”

Keith Robinson, of the Society of Trust and Estate Practitioners, said: “On behalf of Step Bermuda, I welcome the news from Brussels that the EU has recognised that we ought not to be categorised as a non-cooperative jurisdiction.

“Our trust industry has a long history of high regulatory standards and I am sure the whole industry will join with me in thanking the Bermuda government for its hard work over the last few months.”

The post Business leaders welcome blacklist decision appeared first on ILS Bermuda.

]]>
Bermuda Stock Exchange pushes ILS as ESG investment class http://www.ilsbermuda.com/news/featured/bermuda-stock-exchange-pushes-ils-as-esg-investment-class/ Fri, 10 May 2019 15:01:11 +0000 http://www.ilsbermuda.com/?p=4695 The Bermuda Stock Exchange (BSX), which houses the majority of the world’s outstanding catastrophe bond market as listings on its exchange, is pushing the insurance-linked […]

The post Bermuda Stock Exchange pushes ILS as ESG investment class appeared first on ILS Bermuda.

]]>
Sustainable Development Goals

The Bermuda Stock Exchange (BSX), which houses the majority of the world’s outstanding catastrophe bond market as listings on its exchange, is pushing the insurance-linked securities (ILS) asset class as an investment with Environmental, Social and Governance (ESG) qualities.

The BSX has launched its own ESG initiative, as it looks to encourage sustainable and responsible growth for member companies, listings and the wider investment community.

The BSX said that it, “acknowledges its role as a leader to promote the development of a sustainable approach to the financial system and to take actions that transition towards a sustainable economy and financial future for current and future generations.”

Greg Wojciechowski, CEO of the BSX, explained why it’s important that financial institutions look to promote ESG quality within the assets they house, “Stock exchanges are at the intersection between capital market players and their increasing responsibility to ensure business practices are geared toward positive environmental, social and governance practices. At the BSX we are moving forward in encouraging and empowering social impact investing and compliance with best market practices and driving sustainable finance as ESG standards become increasingly important and formalised.”

The BSX is currently home to 950 listed securities, among which are insurance-linked securities (ILS) and catastrophe bonds that are increasingly acknowledged to be an asset class with ESG qualities, given they provide insurance and reinsurance capacity largely for use as disaster risk financing and recovery capital.

The 330 listed ILS issuers on the BSX, representing $32.7 billion in market capital outstanding, a significant segment for the exchange.

The BSX notes that ILS and cat bonds have been acknowledged as sustainable development investments. We’ve explained before that some of the largest institutional investors in the ILS asset class have highlighted their ESG qualities, saying that they fit a number of the United Nations Sustainable Development Goals (SDG’s).

“As investors look to grow their holdings in asset classes linked to social and responsible investments, this creates an increased pool of investors in these securities which are helping to narrow the protection gap which are uninsured and underinsured risks,” the BSX explained.

Catastrophe bonds and ILS do provide disaster risk financing capacity that can help to encourage resilience to disasters and climate change, a gap in financing for many parts of the world and ultimately supporting the communities affected by disasters, which may be exacerbated in future by climate as well.

The BSX said, “As the world leader in ILS, Bermuda will play an increasingly important role in assisting communities around the world adapt to and recover from natural disasters, a changing climate and the resulting impact on vulnerable communities. And many of the BSX’s listings, especially in the Insurance Linked Security (ILS) Sector, are well advanced in developing products that move the sustainable finance agenda forward.”

Catastrophe bonds tend to be classified as meeting three of the Sustainable Development Goals: 11.5 – Reducing the impacts to human lives from disasters and creating more sustainable cities and communities; 13.1 – Taking action to increase resilience and capacity to combat and recover from climate change; and 8.1 – Increasing access to financial services to enhance inclusive and sustainable growth potential.

Through the provision of capacity that aids the responce to disasters and climate change related catastrophes, as well as the recovery, ILS are becoming an important source of risk transfer and risk funding. In some cases this has also led to governments leveraging the capacity of the capital markets through cat bonds, so they can free up their own budgets for disaster resilience and reconstruction efforts as well.

Wojciechowski further commented, “The emerging trend for entrepreneurs, investors and business people is to incorporate ESG initiatives when investing and doing business. This trend will only become more important in the future. What is clear is that companies can no longer simply seek to make a profit and return for shareholders. Success will also be measured by the extent to which companies embrace ESG initiatives. As climate change, social awareness and transparent governance become more important, at the BSX, we see this as an opportunity to help our member companies move forward with an ESG agenda that will assist communities around the world adapt to a changing world in terms of environmental change, social issues and more transparent governance.”

Nandini Sukumar, Chief Executive Officer, The World Federation of Exchanges (WFE) of which the BSX is a member, added, “We are delighted to see BSX launch its ESG initiative today, and firmly support the exchange on its sustainability path. We are particularly pleased to see the BSX formally embrace the WFE’s five Sustainably Principles, principles that constitute a formal declaration by the WFE and its membership to take on a leadership role in promoting the sustainable finance agenda. We recognise that exchanges – as a central point of contact for issuers, investors and market intermediaries – act as important vectors in the transition to sustainability. We therefore take our role in tackling ESG issues, and that of our members, extremely seriously. Only by working in partnership with all industry stakeholders towards a common goal can we hope to move forward to an inclusive and sustainable economy.”

Promoting its ethical investment qualities is good for the ILS asset class, as it can help to attract more institutional investors who have mandates to allocate to asset classes that meet ESG requirements which could help to raise the attractiveness of catastrophe bonds and the wider ILS sector.

To read more articles like this one, visit Artemis.

The post Bermuda Stock Exchange pushes ILS as ESG investment class appeared first on ILS Bermuda.

]]>