This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

Hudson Structured Capital Management Ltd. (HSCM), the reinsurance, insurtech, insurance-linked securities (ILS) and transportation focused investment manager, has hired experienced alternative investment and capital markets executive Katherine Park as its new Head of Capital Formation and Investor Relations.

Park joined Hudson Structured Capital Management (HSCM) on June 3rd, the company said and brings a good deal of experience in capital markets and investor relations, with roles at asset managers and investment banks during her career.

She has more than 20 years of experience in debt and equity capital markets positions, working with alternative investment managers and public and private companies, ranging from early-stage to complex global institutions.

Most recently, Park has been working as Head of Business Development at a number of early-stage investment focused firms, including alternative asset manager Grafine Partners, fintech and artificial intelligence company Pagaya, global specialty finance company TriplePoint Capital, and as an advisor at multi-stage investment firm Andra.

Before that, Park spent 15 years working at Goldman Sachs, with a focus on alternative capital solutions and private capital raising, while also launching and leading its U.S. fund and private capital raising businesses for the investment banking and securities division.

“We are thrilled to welcome Kathy to the HSCM family,” Michael Millette, Co-Founder and CEO of HSCM commented.

“Her proven track record of leadership and her deep understanding of capital markets will be invaluable as we continue to drive growth and deliver value to our investors.”

HSCM said that Park’s appointment reinforces its commitment to excellence and innovation in the alternative investment space.

Hudson Structured hires Park as Head of Capital Formation & Investor Relations was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

Broking group Gallagher has filed a motion to dismiss the Vesttoo transaction related lawsuit brought against its reinsurance arm Gallagher Re by Porch Group, the owner of insurer Homeowners of America Insurance Company (HOA), saying that “the claim falls well short of the plausibility threshold.”

Back in May we reported that Porch Group had launched a lawsuit targeting broker Gallagher Re, claiming it “grossly mismanaged” the administration of the reinsurance related to a reinsurance transaction that was impacted by the Vesttoo reinsurance letter of credit (LOC) collateral fraud.

Porch had already reached a number of settlements related to the Vesttoo fraud, as it had been one of the more affected cedents.

That fraud scheme had seen the use of reinsurance collateral promises from the insurtech, backed by fraudulent letters of credit (LOC) that turned out to have been forged, lacking substance and had no real backing from capital providers.

Porch turned to the reinsurance broker behind one of its deals that involved Vesttoo, as it continued to seek financial compensation for the damages incurred due to the fraud.

Gallagher has now responded and urged the Texas court, where the lawsuit was filed, to dismiss the petition filed by Porch “in its entirety and with prejudice.”

Gallagher explains, in its motion to dismiss the case, that the defendants named in Porch’s lawsuit, parent AJG and Gallagher Re, “were not the fraudsters.”

“The fraud scheme was executed and enabled by a combination of non-parties to this suit: Vesttoo Ltd. (“Vesttoo”), Aon plc (“Aon”) and its subsidiary, White Rock Insurance (SAC) Ltd. (“White Rock”), and China Construction Bank. As it should, Porch has sought recoveries from these parties,” Gallagher stated.

Remember, Porch has already agreed a $30 million strategic arrangement with Aon, that included releasing all claims related to the Vesttoo fraud that it had against the broker, and it filed a separate and ongoing lawsuit against China Construction Bank.

The broking group’s motion continues to state, “But now Porch has filed this one-count breach of contract action against Gallagher Re, who merely acted as the broker for Porch’s subsidiary, Homeowners of America Insurance Company (“HOA”), in the reinsurance deal that ultimately went south. And, in a transparent attempt to avoid federal jurisdiction, Porch has improperly joined Gallagher Re’s parent company, AJG, despite AJG not being a party to the contract at issue. This action should be dismissed for several reasons.”

The motion states that a breach of contract claim levelled against AJG “must be dismissed because AJG has been improperly joined,” and that AJG was not party to the reinsurance contract in question, so was wrongfully named in the suit.

Secondly, the motion from Gallagher also claims that Porch has failed to state a claim against Gallagher Re, saying the claim “falls well short of the plausibility threshold” and that contract language shows that “Porch explicitly agreed that Gallagher Re was not obligated to perform the very tasks that Porch now alleges Gallagher Re was contractually obligated to perform.”

Gallagher says that Porch’s breach of contract claim is implausible and that contract language in documents governing the reinsurance agreement backs this up.

Here, the motion is referring to Porch’s claim that Gallagher Re was obliged to seek evidence that China Construction Bank, the bank named on the fraudulent letter of credit, had agreed to assume the risk related to the funding of the reinsurance agreement.

Gallagher states that its obligations were only to retain documentation related to the funding of the reinsurance agreement, not to seek evidence or confirmation of the funding that was supposed to be sitting behind it.

The motion also states that Porch has failed to joinder all parties to the lawsuit, saying, “Vesttoo and China Construction Bank are both required parties to this suit, but Vesttoo cannot feasibly be joined, and this Court should not in equity and good conscience proceed in Vesttoo’s absence under Rule 19(b). The Petition should therefore be dismissed pursuant to Rule 12(b)(7).”

As a reminder, Porch Group has already filed a law suit in New York against China Construction Bank Corporation.

Gallagher is also stating that without the joining of these other parties to the lawsuit, Porch could feasibly “double” the recoveries the plaintiff receives, if its legal actions were successful.

In such a significant fraud case, involving multiple parties and now with multiple lawsuits looking for recovery across them, the courts are going to have a challenging time ensuring accurate recoveries are awarded, where appropriate.

But parties will seek damages from all avenues, especially as the bankruptcy of Vesttoo did not result in sufficient liquidity to make anyone involved whole for their losses related to the insurtech’s fraud.

As we’ve said in our reporting before, it remains to be seen how successful these legal actions are, when all parties in the reinsurance market value chain that touched the Vesttoo transactions appear to have been equally-duped by the fraud that occurred.

With legal action ongoing the costs are also mounting for all parties involved and still there is no sign of any criminal proceedings, that many involved and observing believe are now long overdue in the Vesttoo saga.

Read all of our coverage of the alleged fraudulent or forged letter-of-credit (LOC) collateral linked to Vesttoo deals.

Gallagher urges court to dismiss Porch lawsuit over Vesttoo reinsurance transaction was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

Italian and global insurance giant Assicurazioni Generali S.p.A. has revised its framework for green catastrophe bonds to incorporate updates and expand its scope, now publishing a Green, Social and Sustainability Insurance-linked Securities Framework in its place.

Generali was early to recognise the potential for insurance and reinsurance linked investments to have green, or environmental, social and governance (ESG) credentials.

Because of the insurers focus on this, Generali launched its own framework for Green insurance-linked securities (ILS) back in 2020.

That framework defined how Generali could use the freed-up capital benefit achieved through its sponsorship of an ILS or catastrophe bond transaction for Green asset investments.

At its core, that meant an amount equivalent to the capital relief benefit achieved through issuance of a Green ILS or cat bond transaction could be exclusively used to allocate capital to, or refinance, green initiatives, projects or assets, under Generali’s framework.

The insurer sponsored its first green catastrophe bond issuance in 2021, the €200 million Lion III Re DAC transaction.

Those €200 million of cat bond notes provided Generali with reinsurance protection against certain losses from European windstorms and Italian earthquakes across a multi-year term.

As we later reported, Generali said that, in the case of the Lion III Re catastrophe bond, it freed up €28.1 million of capital for the insurer, under regulatory capital relief calculated on the basis of its Solvency Capital Requirement at the inception of the cat bond risk period.

That freed up capital was allocated to a sustainable investment deemed to make a positive environmental impact, in this specific case it refinancing a green asset that Generali already had interest in, the Tour Saint-Gobain in Paris, a building project that asset management unit Generali Real Estate was behind, and that on completion achieved the highest marks possible for four international environmental certifications.

It was found that the €28.1 million of capital, freed up due to the issuance of the Lion III Re catastrophe bond, had served to avoid 35.1 tCO2e of greenhouse gas emissions, after an audited impact evaluation undertaken by a third-party specialist.

Now, Generali has revisited the green ILS framework and updated it to become the Generali Green, Social and Sustainability Insurance-linked Securities Framework.

The insurer said that the company “recognises the crucial role the financial industry must play in the transition to a low carbon economy and strives to have an active role in the further development of a sustainable financial market.”

To enhance its ability to address environmental and sustainability issues, where Generali can affect positive change, the new framework has been developed under which the insurer can issue sustainable ILS instruments.

The company further explained, “This Green, Social and Sustainability ILS Framework represents Generali’s latest efforts to align its program with best practice, promote SRI principles, and enhance its ability to support stakeholders in realising their green and social objectives. We see the issuance of Green, Social and Sustainability (‘GSS’) labelled ILS as an effective tool to make a positive contribution to the climate and/or the society, while achieving the Sustainable Development Goals of the United Nations (‘UN SDGs’).

“Through GSS ILS, we aim to further diversify our investor base, focusing on socially responsible and highly dedicated sustainable investors and by strengthening the relationship with the existing investor base.”

As the company has taken important steps to enhance its green strategy since the publication of the first Green ILS Framework, Generali says it has now expanded it further, launching the new framework to align with its Green, Social and Sustainability Bond Framework that was published in December 2023.

Now, under the new Green, Social and Sustainability ILS Framework, Generali can categorise different types of sustainable ILS, including:

• Green ILS, to finance and/or refinance Eligible Green Assets.
• Social ILS, to finance and/or refinance Eligible Social Assets.
• Sustainability ILS, to finance and/or refinance a mix of Eligible Green Assets and Eligible Social Assets.

So as to maximise the impact of the new framework and its contribution to a sustainable financial market, Generali said that it is designed “to reflect the structure of an ILS transaction, which allows the allocation funds to Green, Social and Sustainability initiatives following two different approaches.”

This is, through the use of the freed-up capital benefit, as in the previous case with Lion III Re, and also by use of the proceeds segregated in the SPV in a portfolio of Green and Social investments.

By expanding the scope of its framework for green, social and sustainable cat bonds and ILS, Generali is also aligning with the needs of many investors, that continue to have a strong focus on ESG appropriate assets.

Generali has commissioned Sustainalytics to conduct an external review of the new Green, Social and Sustainability ILS Framework.

Giving its opinion, that company explained, “Sustainalytics is of the opinion that the Generali Green, Social and Sustainability Insurance-linked Securities Framework is credible, impactful and will deliver overall positive environmental and social impacts. Sustainalytics is further of the opinion that the principles of impact and transparency that underlie the responsible investment industry, as well as many of its norms and standards, are applicable to the green, social and sustainable insurance-linked securities (ILS) instruments to be issued under the Framework.

“Sustainalytics is of the opinion that the Generali Green, Social and Sustainability Insurance-linked Securities Framework is impactful, transparent and in alignment with core market expectations.”

Generali’s first green catastrophe bond, the Lion III Re DAC transaction, remains in-force through to June 2025.

With this new framework in place, it will be interesting to see what green, social or sustainability features the insurer incorporates into its next cat bond deal.

Read our stories about ESG investment in catastrophe bonds and insurance-linked securities (ILS).

Generali updates insurance-linked securities framework to “green, social & sustainable” was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

Cayman headquartered reinsurance company Oxbridge Re has reported that the firm’s first series of tokenized reinsurance sidecar securities have now realised a 49% return for the investors backing them, surpassing both initial and updated expectations.

Oxbridge Re launched its Web3 startup SurancePlus in 2022, raising $2.4 million through a sale of the first series of digital or tokenized reinsurance securities, which were named DeltaCat Re.

That $2.4 million of capital was put to work in support of collateralized reinsurance contracts underwritten via the reinsurer’s sidecar structure, Oxbridge Re NS.

The securities represent fractionalized interests in reinsurance contracts written by the reinsurance sidecar vehicle, Oxbridge Re NS, which enters into quota share arrangements with its parent.

As a result, the investors benefit from a return through the performance of the underlying reinsurance contracts that the sidecar held for the underwriting year, which ends at the mid-point of 2024.

Oxbridge Re had been anticipating that investors in the first series of tokenized reinsurance securities would receive a roughly 42% return for the first treaty year.

A few months later, Oxbridge Re CEO Jay Madhu explained that he anticipated a higher return for the sidecar securities investors, saying that it could be 45% for the latest treaty year.

Now, the company has reported today that SurancePlus earned a 49.11% return on its tokenized reinsurance security, DeltaCat Re far exceeding the initial projection of 42%.

Jay Madhu, President and CEO of Oxbridge Re, commented, “Last year, SurancePlus enhanced Oxbridge Re’s special purpose vehicle, Oxbridge Re NS, by integrating digital innovations and insights by offering an RWA tokenized security, thus making reinsurance more accessible as an alternative investment through the Avalanche blockchain. We are pleased with the impressive returns for DeltaCat Re token investors.

“Looking ahead, we are excited about the long-term prospects of our business as we approach the close of our capital raise for the 2024/25 EpsilonCat Re Token.”

Oxbridge Re began that process of raising up to a $10 million target for the EpsilonCat Re tokenized reinsurance securities that will be issued by its subsidiary SurancePlus Inc. and provide investors a way to participate in the 2024/25 underwriting treaty year of the Oxbridge Re NS sidecar structure.

Back in 2019, Oxbridge Re’s sidecar returned 36% to its investors in a catastrophe loss free year.

The 49% earned in the most recent treaty year is therefore both impressive and a reflection of the hard reinsurance market and much improved terms now available in the marketplace.

As we reported yesterday, Oxbridge Re has announced that it is considering “strategic alternatives” for the business, including a potential sale or merger, various capital actions, or even spinning out its tokenized reinsurance investments unit.

So the future is not yet clear for Oxbridge Re, or its strategy to leverage digital asset architecture to facilitate fractionalised investments in its reinsurance sidecar vehicle, but the stellar returns generated for investors should help the company attract attention.

Oxbridge Re’s tokenized reinsurance sidecar securities realise 49% return was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

Oxbridge Re Ltd., the Cayman Islands based reinsurance company, has announced today that it is considering “strategic alternatives” for the business, including a potential sale or merger, various capital actions, or even spinning out its tokenized reinsurance investments unit.

Oxbridge Re launched what it calls its Web3 startup SurancePlus back in 2022, since when it has been issuing tokenized reinsurance securities, that effectively give investors a way to access the returns of its catastrophe focused reinsurance business.

Previously, Oxbridge Re had been operating a typical collateralized reinsurance sidecar, alongside its own collateralized balance-sheet.

But the SurancePlus strategy sought to take advantage of digital securities technology, to provide an alternative access point for investors, utilising blockchain type infrastructure.

When we last reported on the company, Jay Madhu, the Chairman and Chief Executive Officer of Cayman headquartered reinsurer Oxbridge Re, had said that the firm’s first series of tokenized reinsurance sidecar securities were set to deliver investors a 45% return, surpassing the initial expectation of 42%.

The securities represent fractionalized interests in reinsurance contracts written by Oxbridge Re’s reinsurance sidecar vehicle, Oxbridge Re NS, which enters into quota shares with its parent.

So the investors access a return through the performance of the underlying reinsurance contracts that sat in the sidecar for the current underwriting year, which runs to the mid-point of 2024.

Today, Oxbridge Re said that its board of directors has “initiated a process to evaluate strategic alternatives to maximize shareholder value.”

Explaining that, “As part of the evaluation process, the Company will consider a full range of strategic alternatives for the Company, and/or its Web-3 division subsidiary SurancePlus Holdings Ltd, including a sale, spinout, merger, divestiture, recapitalization, and other strategic transactions, or continuing to operate as a public, independent company.”

CEO Madhu further said, “To reinforce our strategic vision, we are committed to exploring opportunities that will deliver value to our stakeholders and ensure continued success in our evolving industries.”

The company further said that it cannot guarantee that the evaluation of strategic options will result in any deal or transaction.

Oxbridge Re has never really scaled into a particularly meaningful reinsurance player. But its tokenized reinsurance securities are the first and only such tech-focused initiative to come out of the traditional reinsurance market and so could prove attractive to players that consider this a viable approach to partnering with investors and bringing alternative capital into an underwriting business.

Oxbridge Re considering “strategic alternatives” including sale or merger was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

Descartes Underwriting, the parametric insurance and data-driven risk transfer specialist managing general agency (MGA), has hired former OTT Risk employee Matthew James as its new Commercial Director, UK & Ireland.

James joins Descartes after ten years at broker WTW and then a stint as Head of Business Development in London for the now defunct parametric MGA OTT Risk.

At Descartes, he will be tasked with leading business development activities in London for the firms parametric insurance solutions.

In his time at broker WTW, James worked on structuring novel parametric solutions designed to manage the weather-risk exposures of clients across a range of industry sectors.

He then joined parametric MGA startup OTT Risk, again in London, but that company shuttered its operations in the first-quarter of this year.

At Descartes, James is taking over from Paul Jones, who is leaving the company after a near three year stint, to pursue other opportunities.

“We’re really excited to have attracted someone of Matthew’s experience and ingenuity as the new head of our London office,” explained Descartes co-founder and Chief Executive Tanguy Touffut. “His experience working with clients as a broker, assessing their climate and insurance challenges then crafting parametric solutions, will bring a new perspective to our work. Our restated strategy remains to deliver strong growth in high-potential markets, and Descartes will continue to deliver, in London and around the world.

“I’d like to thank Paul for his contribution to our development over the years. His work, particularly in educating new brokers to the benefits of parametric and developing and distributing coverages for peak peril exposures, has been invaluable. I wish him every good fortune.”

“I am super-pleased to be joining Descartes,” Matthew James added. “They are renowned as a leader in parametric insurance and I’ve followed their growth closely since their birth in 2018. The team of data scientists in Paris and London boasts some serious brains. Their depth of expertise and understanding of climate change’s impact on business is hard to beat. I look forward to working with this team at the cutting edge of parametric insurance, and alongside Ola Jacob and the rest of Descartes’ London team.”

Descartes Underwriting hires OTT Risk’s James as Commercial Director, UK & Ireland was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

In a string of research reports, the World Bank Group and European Commission call on governments across Europe to utilise more in the way of disaster risk transfer and insurance to reduce the pressure from weather and natural perils on budgets, including the use of catastrophe bonds to access capital market investors for reinsurance risk capital.

The conclusion of the research is that European countries are retaining far too much of their natural catastrophe risk exposure, with the lions share of the costs continuing to be dealt with by government and European budgets, while too little is transferred to insurance, reinsurance and institutional investor markets.

The World Bank and EC reports state that the continent “needs smart investments to strengthen disaster resilience, adaptation and finance response to disaster and climate risks.”

With Europe seen as warming faster than any other continent, the pair say it is “highly vulnerable to the increasing risks associated with climate change.”

“2023 was the hottest year on record with disasters across Europe costing more than €77 billion. Projected costs of inaction in a high warming scenario could reach 7 percent of EU GDP,” they explain.

“Disasters are devasting for everyone, but can disproportionately impact Europe’s most vulnerable communities, increasing poverty and inequality,” Sameh Wahba, a Director at the World Bank said. “Without adequate systems, these events can erode development gains. There is still time for European countries to take actions that will protect people’s lives, infrastructure, and public finances from disaster and climate change impacts, though there is a narrowing window of opportunity to take action.”

Investment in resilience is a significant focus of the work, with many critical sectors of the European economy seen as exposed to multiple natural hazards.

“Investments in prevention and preparedness are urgently needed at all levels, starting with critical sectors that provide emergency response services,” Hanna Jahns, Director of the European Commission Humanitarian Aid & Civil Protection unit said. “The needs are significant and the pressure on the EU and government budgets is high. Going forward we need to invest in a smart way, prioritizing the investments with the highest resilience “dividends.””

They urge the use of risk and climate change data and analytics, to help in prioritising actions and to select the most impactful prevention, preparedness, and adaptation investments.

In Europe, climate change adaptation costs up to the 2030s are thought likely to be in the range of €15 billion to €64 billion annually, underscoring the significant investment required.

“There is a significant gap in adaptation financing in Europe,” explained Elina Bardram, Director, Directorate-General for Climate Action. “Closing it requires a major scale-up of public, private, and blended finance. Investment planning and financial strategies are not yet adequately informed by an understanding of the costs of climate change adaptation at national and EU levels. This needs to change.”

Where the reports become most relevant for our readers is around financial resilience.

The World Bank and European Commission reports state that, “too much of the disaster and climate risk is managed through budgetary instruments at the EU level and by EU Member States, with gaps concerning pre-arranged funds and the use of risk transfer mechanisms, such as risk insurance. ”

In seeking to maximise societal benefits from investments made, the use of risk transfer alongside this to cushion the costs of climate and natural disasters are seen as key.

Public finances are in some cases being stretched by multiple natural disasters each year, so upfront risk financing and transfer can help to lessen the burden on the budgets of European countries and their populations.

The reports identify funding gaps for major disasters and note that should countries face multiple major events in a year, the impact could drain funding at the EU level (as well as countries specifically).

As a result, the reports state that, “Countries in Europe need to enhance their financial resilience through better data utilization and innovative financial instruments, including risk transfer to the private sector.”

Here, catastrophe bonds are highlighted throughout the reports, as tools that can aid in preparing for financial impacts and enhancing the ability for Europe to fund the response to disasters.

The capital market is seen as one source of risk transfer that Europe should consider.

“At present there are no risk transfer products at the EU level or in the case study countries, and consideration should be given to their incorporation in future DRF strategies,” the report explains.

Citing the use of catastrophe bonds by US utilities for wildfire risk, the reports suggest a potential role in Europe.

“CAT bonds as a risk transfer mechanism are less common in the EU and should be further explored once risk models are available to see if this could provide a cost-effective option to manage the risk of wildfires,” one of the reports says.

Both index and parametric insurance techniques are also suggested as applicable to the disaster funding gaps faced in Europe, as these can help to make for responsive risk transfer tools, that can help in financing recovery quickly after disasters occur.

The European Union Solidarity Fund (EUSF) is seen as a financial structure already in existence that could be supported better by risk transfer.

One of the reports states, “The existing EU level instruments take time to disburse, which may delay emergency response. Due consideration should be given to the introduction of a EU level instrument to provide a top-up to national governments to help them finance emergency response. Such an instrument could be embedded within the European Union Solidarity Fund (EUSF).”

Disaster risk financing and transfer tools and techniques can help European countries and budgets reduce their liabilities after disaster strikes, including through responsive techniques and by tapping the capital markets.

The report continues, “A parametric risk transfer instrument — e.g., a catastrophe bond — could be introduced to secure private capital when needed. This approach would recognize the significant opportunity cost of holding reserves at the EU level and instead structure an additional instrument to release finance into the EUSF when severe events occur.”

The report uses the example set by Mexico, in its use of private insurance, reinsurance and capital markets through its catastrophe bonds, as setting an example that Europe can draw from.

The World Bank sees Mexico as “setting the standard” for disaster risk management through its use of financial instruments such as cat bonds.

The reports go into much more detail around how Europe can put in place safety nets, both for its budgets and for its populations, while making the best use of modern financing techniques, risk transfer tools and the appetites of private and capital markets.

It’s encouraging to see the discussion on Europe continuing, as in the last year we’ve also seen the European Central Bank (ECB) alongside a macro-prudential oversight body it operates, the European Systemic Risk Board (ESRB), calling for greater use of catastrophe bonds to address the insurance protection gap and mitigate catastrophe risks from climate change in the European Union.

World Bank & EC call for scaled up European disaster risk transfer & cat bonds was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

When global reinsurance firm Swiss Re announced its first-quarter results last week, the company also notified shareholders and markets that it intends to withdraw from its iptiQ business, a tech-focused initiative that effectively brought the giant balance-sheet of the reinsurer much closer to the risk.

Having a background (in a previous life) in technology, e-commerce and finding ways to match capital with sources of demand in the most direct and efficient ways possible, I was always a fan of the iptiQ strategy.

I’ve described it before as Swiss Re “finding innovative ways to source risk as directly as possible” and while Swiss Re always called its iptiQ digital platform a B2B2C strategy, I’ve always viewed it as an innovative way to “white-label the Swiss Re balance-sheet for third-parties that can originate risk.”

iptiQ allowed Swiss Re to bring its risk capital and underwriting rules much further forward in the markets value-chain, though the use of technology, API’s, embedded strategies and partnerships, really all very typical e-commerce techniques, but less typical in wholesale capital financing like reinsurance.

By white-labeling the Swiss Re balance-sheet, business rules, underwriting and pricing, then making them available to partners through the iptiQ tech platform, the reinsurance firm was also bringing the end-client much closer as well.

Just a few years ago, Christian Mumenthaler, the outgoing CEO of the company, had said that offering things outside of pure capital transfer, such as iptiQ, was a core strategy, saying that these initiatives were “a differentiator, compared to just this traditional, more commoditised reinsurance.”

Back then, iptiQ was seen as one of the crown jewels for an expansive Swiss Re, a way to do more business directly, sourcing risk premiums more directly from the end-customer, shortening the market chain and embedding the company values and capital resources within partners business models.

Mumenthaler himself had said that capital was not the main value proposition in reinsurance, it was just an entry ticket to the fray, while expertise, service and innovation would drive success.

As the iptiQ business was growing and Swiss Re’s focus on alternative capital and insurance-linked securities (ILS) investors had been rekindled with the expansion of its Alternative Capital Partners (ACP) unit and launch of dedicated ILS funds, we had described the iptiQ strategy as having:

“…the potential to become another source of risk for Swiss Re and its third-party capital partners, expanding the reinsurers reach and ultimately creating a bigger mouse-trap for risk.”

Fast-forward to 2024 and iptiQ is no longer a core focus, in fact it’s seen as an initiative to withdraw from by Swiss Re.

It’s important to note here, that Swiss Re is set to maximise as much value as it can from iptiQ, as it withdraws and potentially sells it as a whole or in parts, which could be quite lucrative given the entire venture was created and built in-house from scratch and you could see any buyer maintaining a relationship with the reinsurer and perhaps even some level of access to balance-sheet capacity.

Now, with CEO Christian Mumenthaler leaving Swiss Re after 25 years and Andreas Berger stepping in to that position from July 1st, Mumenthaler made a last appearance at the quarterly analyst call recently and explained his view on the planned withdrawal from iptiQ.

Which gave some insights into how Mumenthaler and Swiss Re thinks about the reinsurance market today, versus how the landscape looked just a few years ago.

Mumenthaler explained the backdrop to the creation of iptiQ during the analyst call, “There was a time where there was a significant anxiety around reinsurance and low-interest rates and capital flowing in. Remember, in about 2017 after the big nat cats in the US, for example, pricing really didn’t react.

“So, it was really a question of, how is this whole value-chain going to develop and where will we play as Swiss Re in the future?

“That’s the time, I would argue you need to start to build strategic optionality and think about different places in the value-chain and have options in also the ACP (Alternative Capital Partners) space.”

Next, Mumenthaler explained why the context has changed today and why this makes iptiQ less attractive to retain, for the global reinsurance firm.

“What has changed is really, in the last one and a half years or so, a very strong interest rate increase ending this huge phase and stopping the capital flow, which was relentless coming from outside into the reinsurance business,” Mumenthaler said.

Continuing, “So, that means the coop is much more secure and the other thing that has changed is that, on the insurtech side, while things are developing, they are developing more slowly and there’s no real disruption to be seen.”

Going on to say, “So the question is not whether it can fundamentally be a good business or not. It is a question of, does it fit as part of our long-term future, does it fit with us?

“There I have to say, I think in another context, the sense was yes, this is a strategic optionality, we need.

“But, in the current context, I think the honest answer is, it’s very hard to see a future where we will need this, that’s more honest to say.”

Here, it’s worth pointing out, that Swiss Re’s reinsurance business has been expanding through the recent hardening of the market and now with stability largely the current market dynamic, profits look set to be attractive, loss activity and legacy effects allowing. So it’s perhaps not surprising the focus has changed, alongside this change in context and market dynamic.

Mumenthaler said that, at the time of iptiQ’s planning and launch, “We felt there was a very strong case for it.”

But given the changed dynamic in reinsurance in 2024, “Let’s be open that this is not a fit with us for our long-term strategic future. I can’t foresee a huge impact on us, so this is going to be managed for value.”

It’s really interesting to hear Mumenthaler’s viewpoints on this, as the changed dynamics he refers to are a lot to do with what drove the significant softening of reinsurance rates, especially in property catastrophe risks and also the growth of the insurance-linked securities (ILS) market.

But, perhaps it was not the growth of ILS capital that disrupted things and drove the reinsurer to explore initiatives such as iptiQ, rather it might have been the fact that all the major reinsurers of the world lowered their pricing, relaxed their terms and became far more competitive during that soft market phase, almost as a response to the rapid expansion of ILS and alternative capital.

Today, the ILS and alternative market is at least the same size, or bigger, and far more embedded in reinsurance than it had been back in 2017 and prior.

The main difference being, that ILS capital is now accepted as a stable, complementary, necessary capital extension and source of protection for the traditional industry. Not something to be afraid of in case it rapidly ate your lunch, so to speak.

The overall insurance and reinsurance industry has matured and learned to harness the appetite of institutional investors, to its benefit and we now stand with a much more robust capital framework for the industry today, than we did a decade ago thanks to ILS products and investors.

Will the dynamics ever return that could drive reinsurers to again seek to be innovative in bringing their capital right to the forefront of the market chain?

Quite possibly, in fact we do see this in many discrete areas, but for now we appear to be in a more balanced status-quo, between traditional and alternative, perhaps helped by the new balance in risk bearing between primary and reinsurer.

It won’t last forever, but finding a comfortable middle-ground where both sides flourish has been beneficial for profits and returns all round, meaning there are motivations to sustain the way traditional and alternative interact with less direct competition today.

All that said, it’s surely just a matter of time before some innovative company (maybe even Swiss Re) finds new ways to connect its balance-sheet capacity to burgeoning sources of risk far more directly (API’s to connect capital, algorithmic business rules to define the underwriting, anyone?).

The (reinsurance capital) context has changed: Mumenthaler, Swiss Re was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

CatX, a digital catastrophe and parametric risk exchange start-up, has launched a new artificial intelligence (AI) tool named Catamaran, which can create and analyse a reinsurance submission then provide rapid feedback on investor interest and pricing.

The stand-alone artificial intelligence-powered tool can be used by brokers and underwriters to prepare high-quality structured reinsurance submissions.

With the Catamaran AI, this can be achieved by uploading any existing documentation or modelling files, while the AI model can extract any data point to populate a digital submission that can be used to present risks to investors or reinsurers, CatX explained.

Most interesting though, is the fact Catamaran can then provide feedback on whether there is interest from the institutional investors using CatX’s platform in offering capacity to support the reinsurance deal.

In addition, the Catamaran AI can also provide indicative pricing, to support investor and reinsurer decision-making.

The Catamaran reinsurance submission tool can also provide an export of the information in a manner compatible with standard insurance file formats, such as MRCV3 or ACORD, CatX said.

CatX hopes that, with the use of Catamaran’s AI technology, the structured submissions can “help to make insurance opportunities appealing to a wider range of investors.”

Thanks to recently announced partnerships, CatX’s platform also allows users to run third-party risk models from providers such as RMS and Cybercube, so that risks can be presented in a more investor-friendly format.

Going into more detail CatX explained, “Investors and reinsurers will be able to use Catamaran to analyze incoming submissions and manage transaction pipelines. Investors can run analyses to extract key information about underlying portfolio and modelling data. They can also compare versions to identify similarities, differences, or changes in conditions and wordings. On the CatX platform, opportunities are matched with funds that define their investment preferences across minimum rates, cedents, underwriters, regions, and perils.”

“We have seen first-hand how effective structured digital submissions can be in securing better-priced capacity from institutional investors. They will help to grow the alternative capital market through enhanced transparency which supports decision-making and helps to attract a broader investor base,” explained Benedict Altier, CEO of CatX. “Artificial intelligence will play a key role in helping the industry improve standardization, while still requiring underwriters and brokers to review key details to ensure accuracy.”

“With Catamaran, we are not only improving the quality of submissions but also paving the way for more advanced underwriting processes,” added Lucas Schneider, CTO of CatX. “Our machine-readable submissions are designed to facilitate algorithmic underwriting, ensuring that opportunities are accurately matched with the right markets.”

“Catamaran is the easiest way to bring submissions to new capital sources. The tool can automatically build a comprehensive deal page containing structured transaction information, contracts and modelling files,” Felix Terpstra, Lead Engineer of CatX also said. “Automating the basics allows underwriters and brokers to focus on getting the details right, therefore producing higher quality submissions with quicker turnaround times.”

It’s a very interesting addition to the CatX platform offering, but perhaps a first step away, or slight detour, from the initial goal of becoming a risk placement and exchange tool, to connect risk to the capital markets.

A number of attempts to create true risk exchange functionality for the reinsurance market have been stymied by brokers in the past.

So, positioning to add value that can support the broker community’s operations is a shrewd move, as that is the best way to gain traction in reinsurance, by supporting the broker processes and making their lives easier, while allowing them to continue owning their client relationships.

It’s a particularly delicate balancing act, to innovate in the reinsurance transaction placement and syndication space, while not stepping on broker toes.

CatX launches Catamaran AI, provides feedback on investor interest & pricing was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

Banque Bonhôte & Cie, a Swiss private bank, investment firm and wealth manager, has announced the launch of a new environmental, social and governance (ESG) focused fund strategy that will incorporate catastrophe bonds as one of its allocations.

Pierre-François Donzé, Head of Asset Management at Banque Bonhôte, said that, “Our approach and the integration of ESG criteria, is based on a quantitative allocation methodology to identify appropriate investment opportunities in the entire spectrum of the fixed income bond universe.”

The newly launched Bonhôte Selection Global Bonds ESG fund strategy does not follow a benchmark, instead leveraging quantitative methods to identify assets to invest in from the fixed income universe, based on indicators that define the attractiveness of one type of bond, over another.

These can range from the majority of the global fixed income universe, including sovereign bonds, investment-grade and high-yield corporate bonds.

But in addition catastrophe bonds are a specific asset class that will be targeted for this ESG focused investment fund strategy, the private bank explained.

The private bank notes that, catastrophe bonds, “Offer an advantageous risk/reward and provide useful diversification through a performance that is largely uncorrelated with conventional financial markets.”

Explaining that, “CAT bonds, which are part of the insurance-linked securities (ILS) category, are used by insurers and reinsurers to transfer the risks of predefined events to investors.”

The strategy has been optimised for investors whose reference currency is the Swiss franc and takes into account the cost of currency hedging as well.

The use of ESG criteria to identify opportunities is “a fundamental part of our investment strategy,” Banque Bonhôte & Cie said.

“The fund promotes environmental or social features, or a mix of the two, by investing in the vehicles and securities of issuers with an ESG profile above the median of their peers. Many controversial business activities and sectors are automatically excluded,” the company further explained.

Catastrophe bonds can be up to a maximum of 20% of the ESG investment fund strategy

Julien Stähli, Director of Investments, stated “This new fund gives pride of place to ESG criteria and marks a further step in our long-standing commitment to responsible investment and quantitative approaches.”

Donzé also said the approach taken, “Makes it possible to add value compared to strategies limited to a single market segment. The indicators used estimate the relative attractiveness of the various segments of the bond market on a historical basis.”

He also said that the Global Bonds ESG fund portfolio will be “dynamically rebalanced” when the indicators used suggest this is necessary.

It’s clear that Banque Bonhôte & Cie recognises the investment qualities of catastrophe bonds and the diversifying benefits they can deliver to portfolios, as well as the inherent ESG qualities given their role in the provision of critical disaster risk financing to support the global insurance and reinsurance industry.

As we previously reported, Banque Bonhôte & Cie had said before that catastrophe bonds, as an asset class, exhibits the rare property of price moves that are independent of broader financial markets and so can be considered “the only true source of diversification.”

Banque Bonhôte launches ESG fund strategy incorporating catastrophe bonds was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.