The ILS Bermuda Committee put on a great event the other week in Bermuda – Convergence 2019, the seventh event in their series. It was widely supported with over 400 delegates from 14 different countries attending to network and listen in on thought-provoking discussions in the alternative reinsurance, convergence and ILS marketplace.
My slot, on Emerging Opportunities, focused on developments in legacy and the relevance for ILS. Some players in the market have used ILS funds to support their legacy deals over the years, although the primary focus – property cat business and short-tail exposure – has seen ILS fairly agnostic about legacy certainly compared to property cat business.
As a permanent capital strategy, closed funds have their limitations but where ILS potentially has a role is in supporting the core capital of a legacy group by bringing larger pools of capital to bespoke deals. These can be structured either as side cars or through segregated account structures – with a collateralised reinsurance in place to the one in 200 level.
Fundamentally there seems to be a viable route to accessing larger pools of capital to support growth without the need to acquire the dedicated platform; this can be achieved by partnering. This brings ILS funds diversification from short-tail property cat business, a new income stream and for mid-sized legacy groups like Compre, more access to capital at a lower cost. Lowering the cost of capital will allow greater competition for the larger deals.
Definitely food for thought. Some really smart people at Convergence – I loved the brainstorming and discussions around developments in the global market from securitising casualty risk to Pool Re’s terrorism bond and managing disease risk in Africa!
Next up is the AIRROC Legacy Transactions and Networking event in New Jersey – I’m expecting a healthy debate on Insurance Business Transfers in the US!