Accelerating

The reinsurance and broader risk transfer market is increasingly becoming a process of matching risk to the right capital, in the most efficient manner possible, with industry trends pointing to a need to accelerate this transport of risk to capital.

Combining ILS structures with Insurtech promises to enhance and accelerate this process dramatically, while raising efficiency and lowering costs, all of which insurance and reinsurance markets need right now.

Re/insurance or the process of transferring a risk to an insurer, who keeps a piece and transfers what it does not want to retain to a reinsurer, who does the same with a retrocessionaire (and so on), has long been a relatively linear value-chain, backed by equity financed balance-sheets.

That began to change in the 1990’s, as financial engineering technology was leveraged to open up the transfer of risk to the capital markets.

As a result the nascent insurance-linked securities (ILS), catastrophe bond, ILS fund and market for collateralised reinsurance structures was born.

Insurtech has now witnessed what ILS has done to the risk-to-capital value-chain, as well as the response of traditional re/insurers and now intends to accelerate the transfer of risk to capital even further.

The risk-to-capital value-chain we see in decades to come will likely look very different to the one we see today.

First published in Recap, Reinsurance Magazine's weekly market bulletin.