Month: December 2023

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Craig Hupper, an executive from global reinsurance company TransRe who is well-known and liked in the insurance-linked securities (ILS) community, is set to retire from the firm at the end of this year, Artemis has learned.

craig-hupper-transreCraig Hupper is a Senior Vice President at TransRe and currently holds the title of Managing Director, Head of Sustainability and Resilience.

But, through much of his career at the reinsurance company he has developed and led TransRe’s third-party capital and ILS offerings.

Hupper already had insurance and reinsurance market experience, gained on the broking side of the market, when he joined TransRe back in 1998.

At first Hupper was a VP of non-traditional underwriting and the Head of Retrocession for the reinsurer, after which he became an SVP and the Director of Risk Management, before moving over to dedicate his time to further developing third-party capital initiatives at TransRe in 2013.

Hupper has been instrumental in the build-out of the third-party capital and insurance-linked securities (ILS) offering at TransRe, as well as in the development of investor relationships.

His work at the company included, leading on the launch of TransRe’s long-established collateralized reinsurance sidecar vehicle, Pangaea, as well as other initiatives that connected institutional investor capital with reinsurance risk (private ILS arrangements) and also the launch of TransRe’s Bowline Re catastrophe bond program.

Hupper then shifted roles at TransRe in 2021, taking on a new position leading Environmental, Social & Governance (ESG) at the reinsurance firm.

Mike Torre, who had joined TransRe from broker Aon around five years ago, took over the lead at TransRe Capital Partners, managing the reinsurers third-party capital initiatives and relationships that year, as Hupper’s full-time focus moved to the new role.

Torre continues in that Capital Partners lead role today, supporting TransRe’s existing and future partnerships with alternative capital providers.

With Hupper now set to retire from TransRe at the end of this year, the company had already promoted existing employee Brett Denyer to become Head of Sustainability and Resilience earlier this year.

Denyer had already been a key member of TransRe’s Task Force on ESG for a number of years, and has also helped the reinsurer in further integrating ESG considerations into underwriting processes and decision-making.

While Hupper is now departing TransRe after his roughly 26 years of service, he intends to remain connected to the insurance-linked securities (ILS) market and be involved in selected reinsurance, ILS and sustainability focused ventures, following some time off early in 2024.

Hupper spoke at our New York conference back in 2022, participating in a panel session focused on ESG in ILS, which you can still watch here.

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While the insurance-linked securities (ILS) sector has strengthened its governance practices considerably in recent years, when it comes to environmental, social and governance (ESG) considerations, ILS manager selection really matters, as there is variation in how ESG has been adopted and practices are followed, according to Frontier Advisors.

frontier-advisors-logoFrontier Advisors is an Australian independent investment consultant with experience advising regional institutional investors that allocate to the insurance-linked securities (ILS) asset class.

In a recent paper, Isabella Milazzo, a Consultant in the Alternatives Research Team at Frontier Advisors, explained that for end-investors, ESG remains an important consideration when allocating to the insurance-linked securities (ILS) asset class.

She explained that ESG is increasingly being incorporated into the ILS market, saying that consideration of ESG issues is deemed to be “critical for the development of the ILS market and for insurance and reinsurance markets more broadly.”

As a result, “ILS managers are increasingly focused on improving ESG practices throughout the entire investment process,” Milazzo said.

But she also noted that, “Manager selection matters when considering ESG factors,” saying that, “Frontier has observed many instances in recent periods where ILS managers will deem contracts uninvestable on the basis that counterparties do not meet ESG criteria.

“However, there is variation with how stringent managers are with this process.”

Milazzo went on to explain that, for the ILS manager community, “environmental and climate change risk is of high importance.”

As a result, a significant amount of time and resource is put into understanding climate risk, the influence it has on specific perils and the effect it can have on ILS investments, Milazzo said.

She also highlighted that, as ILS investments are used to support resilience against natural disasters, this aligns with environmental sustainability goals.

On the social side, Milazzo noted that ILS investments also “inherently provide positive social impact in that they support the efficient functioning of the insurance market.”

ILS is one of the contributing sources of funding when natural disasters occur, helping in the rebuilding and recovery of affected communities.

Finally, Milazzo also highlighted that ILS managers own governance practices “have become increasingly robust over recent years.”

In fact, “It is typical for managers to conduct deep assessments of governance factors associated with all parties involved in ILS investments,” Milazzo explained.

Because of this, the ILS asset class is continuing improving and increasing the incorporation of ESG issues into its processes and ILS manager decision-making.

But, with ESG practices and their adoption not a level playing-field in the industry, it is important that investors do their own diligence on ILS managers, if ESG is one of their core investment tenets.

Recall that, the ILS ESG Transparency Initiative is a global insurance-linked securities (ILS) industry group of investment managers focused on enhancing environmental, social and governance (ESG) transparency in the ILS market.

When it comes to ESG, ILS manager selection matters: Frontier Advisors was published by:
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A new reinsurance fund has been launched to support delivery of innovative insurance products to protect smallholder farmers in Africa, with One Acre Fund Re expected to become a source of capacity to back what will likely be largely parametric risk transfer instruments.

africa-mapThe initiative has been launched by One Acre Fund, a social enterprise supporting smallholder farmers across Sub-Saharan Africa, with a focus on enhancing food security and resilience to climate risks, with a goal of supporting the development of prosperous communities.

The reinsurance fund, named One Acre Fund Re, has been designed with the support and partnership of the International Finance Corporation (IFC), U.S. International Development Finance Corporation (DFC) and parametric risk transfer specialist and risk pooling entity the African Risk Capacity (ARC).

One Acre Fund Re will provide a critical financial safety net for 1 million smallholder farmers in 2024 and that figure is expected to scale steadily in future years.

The idea is to improve the insurance offering for farmers in the face of devastating impacts on crop yields.

The goal is to cover at least 4 million farmers by 2030, with a range of insurance products, backed by reinsurance from One Acre Fund Re.

One Acre Fund Re will use One Acre Fund’s on the ground presence and rigorous data gathering, to allow for the design and implementation of new insurance products with direct payouts, in a way that more effectively responds to farmer experiences.

Right now, agricultural insurance is only available in 4 out of 54 countries across Africa, and currently, only 3% of farmers have insurance coverage for their farms.

So there is an enormous opportunity to bring together capital sources and create a new risk pool specifically focused on delivering smallholder farmer specific parametric insurance and crop covers.

It’s not immediately clear how this will be structured. But we assume that African Risk Capacity (ARC) will lend its expertise in risk pooling and the design of parametric insurance, to assist in the creation and roll-out of One Acre Fund Re.

On the reinsurance capital side, it could be interesting to see if One Acre Fund might find the new reinsurance fund a way it could crowd in private capital to support the rolling out of more insurance product in years to come.

There is a significant opportunity to leverage risk pooling and risk diversification techniques, alongside the learnings of the ILS market in utilising the appetite for insurance-linked returns, to generate efficiencies in the delivery of smallholder insurance products.

Even if the reinsurance fund is donor supported, there are still significant efficiencies to be had by better structuring a system for delivery of micro-insurance in both indemnity and parametric forms.

Annie Wakanyi, Director of Global Government Partnerships, at One Acre Fund, commented, “Smallholder farmers make up one of the most climate-vulnerable populations on the planet, facing increased frequency of climate events with devastating consequences on yields and household stability. This insurance offer has the potential to provide smallholder families with a strong safety net when these events occur; yet current market failures mean that most insurance products are too expensive or too limited in coverage to support meaningful resilience. But it doesn’t have to be this way.

“Agricultural insurance can support lasting impact and resilience for small-scale farmers. With economic growth from agriculture 11 times more effective at reducing extreme poverty than any other sector in sub-Saharan Africa, One Acre Fund Re aims to support smallholder families to achieve long-term poverty reduction and resilience.”

The Netherlands Ministry of Foreign Affairs is a long-term strategic partner of One Acre Fund, working together since 2016 and it recently extended its support up till 2027.

Marchel Gerrmann, Ambassador for Business and Development Cooperation of the Netherlands, also said, “When climate shocks hit, like the devastating cyclone we saw earlier this year in Malawi, farmers have no safety nets to fall back on. They are forced to pull children from schools they can no longer pay for, take out high-interest loans, sell assets, and endure protracted hunger.

“One Acre Fund Re aims to transform the way financial entities support smallholders and all profits will be used to increase impact and decrease climate risk.”

Johannes Borchert, Global Head of Risk & Resilience at One Acre Fund, added, “We are planning to roll out One Acre Fund Re in 2024 to five out of nine country programs. From year one, it will benefit over 1m farmers across Africa. As this facility grows, we will extend our services to farmers in all our areas of operation and beyond. We believe the data, experience and underwriting capacity we bring should be extended to offer climate safety nets to as many smallholder farmers as possible.”

One Acre Fund Re reinsurance fund launched at COP28 with ARC, IFC, DFC backing was published by:
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New technologies can serve as a bridge between the re/insurance industry and the world’s most vulnerable, and alongside the use of insurance-linked securities (ILS) and innovative solutions such as parametrics, can help to close the global protection gap, according to the Insurance Development Forum (IDF).

lies-Iyahen-IDFArtemis spoke with Michel Liès, Chair of the IDF Steering Committee and Ekhosuehi Iyahen, IDF Secretary General, around the COP28 conference in the UAE this week, about increasing insurance penetration and building resilience against natural disasters.

“I firmly believe that new technologies have the potential to connect us with the people who are completely unaware of what insurance can bring them,” said Liès.

Expanding on this, Liès noted that in most developing countries many people have access to a phone, but few have an insurance policy, while many vulnerable to the impacts of natural disasters aren’t even aware of the benefits of securing protection.

“I understand that there are certain priorities in life. But if somebody has a phone it becomes connectable. This connectivity, in turn, means that we can share critical messages regarding prevention and preparedness measures to mitigate the impact of disruptive events that have the potential to destroy an individual’s life,” said Liès.

“So, I believe that there is, thanks to advancement of technology, a lot of potential to accelerate progress in addressing and solving these protection gaps. This entails not only using technology to improve productivity in the mature markets, but also leveraging it to enhance insurance penetration in the emerging markets,” he added.

As part of that, added Iyahen, the IDF is exploring parametric insurance solutions.

“Obviously, the importance is the speed in terms of availability of resources. We saw it most recently in Morocco with the earthquake, even though that was not a weather or climate driven event. The value was also in the independence/transparency in terms of the triggering of resources. And I think that this is the governance component that perhaps we could pay a little bit more attention to, in terms of how you objectively release resources in very difficult, sometimes politically fraught contexts,” said Iyahen.

“Taking it back to the climate space and the discussions that are happening around loss and damage etc., it’s important we have conversations around how you actually trigger resources to communities who are affected. I do think that that opens up an opportunity that could be quite interesting for the industry,” she added.

As well as innovative solutions such as parametrics, to close the world’s expanding protection gaps it will take more than the capital of the traditional insurance and reinsurance industry.

“Definitely, ILS is an opportunity for countries where individuals or large communities do not have access to classical insurance and in which you can make efforts made by government to address the protection gap more visible. That’s definitely possible,” said Liès.

Catastrophe bonds, a sub-sector of the ILS space, have been issued by the World Bank’s International Bank for Reconstruction and Development (IBRD) for multiple countries, providing them with protection against natural disasters.

The parametric insurance coverage provided by these transactions shows that ILS can play an important role in building resilience, notably for some of the world’s poorest and most vulnerable to impacts of natural disasters and climate events.

Read all of our interviews with ILS market and reinsurance sector professionals here.

ILS, parametrics and new tech a real opportunity to close protection gaps: IDF was published by:
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