Zurich
11 July 2017
Reporter: Becky Butcher

ILS continues to drive innovation


The insurance-linked securities (ILS) market will continue to drive innovation and efficiency in risk financing for the benefit of protecting buyers and investors, according to Christoph Buerer of Twelve Capital.

Speaking at a Guernsey Insight event held in Zurich, Buerer explained how risks and capital interact on a balance-sheet level from risk management and corporate finance perspectives.

He said: “The benefits ILS investments offer are a telling illustration of the value of active investment management. In contrast, by definition, passive investment gives investors significant exposure to below-average quality firms.”

At the margin, ILS managers would be more disciplined when deploying capital, as investors could essentially redeem their investment, whereas capital investors who inject in a reinsurance company balance sheet would be locked up, meaning capital could not be redeemed.

Buerer also discussed the use of ILS in relation to tail risks—low-probability, high-impact events. It is “imperative to ensure risk transfer payments can be collected in stress scenarios to avoid underinvestment and create value, and fully-funded ILS covers seem superior in comparison to the multi-gearing nature of traditional reinsurance company balance sheets”, he said.

The island's promotional agency, Guernsey Finance, hosted the event, which was attended by 90 industry experts.

Dominic Wheatley, CEO of Guernsey Finance, said: “The continued success of our ILS Insight event, which is now in its fourth year, shows how well thought of Guernsey is as an ILS centre.”

He added: “Our long track record in insurance, specifically our status as Europe’s leading captive insurance domicile, together with our expertise in collateralised reinsurance and the structuring of investment funds and listed vehicles, means that what we can offer is differentiated from many other jurisdictions.”

More Industry news
The latest news from Captive Insurance Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
‘Exciting developments’ in South Carolina’s captive industry
17 November 2017 | Charleston | Reporter: Becky Butcher
Jay Branum of the South Carolina Department of Insurance has revealed the state has “very positive and exciting developments” for its captive insurance industry
‘Explosive growth’ for Tennessee’s captive market
17 November 2017 | Nasville | Reporter: Lorella Fava
After rewriting its captive statute back in 2011, the captive insurance market in Tennessee has seen “explosive growth”, according to the state’s insurance commissioner Julie Mix McPeak
Captive insurance scholarships awarded in Bahamas
14 November 2017 | The Bahamas | Reporter: Lorella Fava
The Bahamas Financial Services Board (BFSB) and the Insurance Commission of The Bahamas (ICB) has selected two recipients for the Associates in Captive Insurance designation scholarships
SRS acquires Barbados captive manager
13 November 2017 | Massachusetts | Reporter: Lorella Fava
Strategic Risk Solutions (SRS) has acquired the operations of CGE Group, a Barbados captive manager
Captives dragged into Paradise Papers furore
10 November 2017 | Bermuda | Reporter: Stephanie Palmer
The captive insurance industry has for the first time been implicated in the so-called Paradise Papers, as a US businessman was identified in one of the leaked documents as a director of a captive insurer
CICA and Butler form professional development partnership
09 November 2017 | Minneapolis | Reporter: Becky Butcher
The Captive Insurance Companies Association (CICA) and the Davey Risk Management and Insurance Program at Butler University have formed a new professional development partnership
US hurricanes set to drive up reinsurance prices
08 November 2017 | New York | Reporter: Stephanie Palmer
Losses resulting from hurricanes Harvey, Irma and Maria, as well as the recent earthquake in Mexico City, are likely to change the dynamic of the reinsurance industry, in a positive way