When deciding whether to access insurance-linked securities (ILS) and non-traditional sources of reinsurance capital, the question is no longer whether to engage. Rather it has shifted to identifying how to bring it into your capital model effectively and meet medium to long-term strategic goals, Jason Bolding, CEO of Gallagher Securities has said.
Writing in the recently published report about Gallagher Securities’ institutional investor survey, Bolding said, “There is no shortage of investors keen to put capital to work in insurance — whether through public or private equity, traditional reinsurance or the insurance-linked securities (ILS) market. But this availability and breadth creates its own challenges.”
With investors increasingly looking to access the sector, as the survey found, but with a focus on transparency, structures, alignment and capital efficiency, Bolding said that it’s becoming increasingly important to identify the right capital, as well as to have it structured in the right way, if it is to deliver on resilience, efficiency and sustainable growth across the market cycle.
“We’re in a market where capital wants access to high-quality underwriting, and insurers want stable, scalable capacity. The value comes from building the bridge between the two,” Bolding explained.
Alternative forms of risk financing, including catastrophe bonds, other ILS instruments, reinsurance sidecars and even direct investments in equity and debt, now represent a “powerful complement” to traditional reinsurance Bolding believes.
They provide new tools to re/insurers, enabling capital bases to be diversified and optimised, while leaning on institutional investor appetites for returns from the market’s underwriting.
“Yet navigating this landscape requires deep expertise. Investors are increasingly selective, structures are more sophisticated, and the alignment between risk originators and capital providers has become paramount,” Bolding stated.
Adding that, “Forward-thinking insurers are integrating nontraditional capital into their medium and long-term strategies — not as a substitute for traditional markets, but as a critical extension of them.
“The question is no longer whether to engage, but how to do so effectively.”
Bolding further said that, “As the market for insurance capital continues to grow, those who can access and deploy insurance risks against capital with precision will be best placed to lead.”
Also read: 60% of institutional investors intend to increase ILS allocations: Gallagher Securities survey.
