Interviews

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Tenax Capital, the London based asset manager that operates a UCITS cat bond strategy, considers Florida exposed catastrophe bonds more attractive now, seeing improvements in the insurance environment there and an excess spread available for its allocations, compared to cat bonds for certain other regions.

A year ago, Tenax Capital was carefully watching Florida insurance and reinsurance market developments and was encouraged by the claims experience associated with 2024 hurricanes, which has encouraged the investor to allocate more capital to cat bonds covering the state in 2025.

Artemis spoke with Tenax Capital insurance-linked securities (ILS) portfolio managers Toby Pughe and Marco della Giacoma to learn more about their growing confidence in Florida.

Pughe began, “In our view, Florida remains attractive from both a pricing perspective and due to its continuously improving legal environment. While last year we preferred to stay on the sidelines — waiting for a test of the new regulatory framework and to ride out the anticipated active hurricane season — we now consider Florida wind an attractive risk to add to the portfolio.

“It has always been a ‘marmite’ state, but it’s undeniable that the wind is currently in the carriers’ sails. The relatively low industry losses from Milton and Helene exemplify this. Depending on how you clean the data — Florida is still trading about 100–150 bps above the overall market spread.”

della Giacoma, continued, “Because of Florida’s concentrated risk, investors are always going to be wary. But we’re more concerned about states with relatively poor risk standards, where even a low industry loss could trigger bond defaults or significant mark-to-market volatility. Whether it makes sense to add lower-quality risks simply because they aren’t in Florida – or because a fund is of a size where it’s required to do so – is up for debate.”

Further explaining the Tenax strategy Pughe said, “Index bonds have tightened, and there will always be someone at the back of the room shouting, “But I can’t keep fattening my tail!”. But, if the choice is between overweighting tail risk or taking on what we typically describe as frequency risk (e.g., secondary perils or poorly modelled risk), the decision ultimately comes down to balancing return stability (historically speaking) with the potential for unexpected volatility from frequency risk.”

Overall, Tenax Capital remains encouraged with the state of the catastrophe bond market, but believes that discipline must be maintained.

“Although spreads have tightened over the past 12–18 months, the most important factor for us is that the underlying terms and conditions remain healthy,” della Giacoma told us.

“We don’t mind sacrificing a bit of premium as long as these terms remain favourable.

“Our focus is on maintaining discipline throughout the cycle and avoiding the rinse-and-repeat mistakes the market tends to make.”

Florida attractive, as it trades above overall cat bond market spread: Tenax Capital was published by: www.Artemis.bm
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In an interview with Artemis around the Bermuda Risk Summit 2025, Kier James, Chief Underwriting Officer (CUO) of MultiStrat, discussed how the company believes that the island will continue to maintain its dominance of the insurance-linked securities (ILS) market as it broadens beyond catastrophe-focused ILS into casualty and specialty lines of business.

Praising the island as an innovator, James of MultiStrat, the specialist underwriter, reinsurance investment facilitator and casualty insurance-linked securities (ILS) company, expressed confidence that Bermuda will remain a key driver of growth in the ILS sector for the foreseeable future.

A key example of this, that James highlights, is the Incorporated Segregated Accounts Companies Act (ISAC Act) which was enacted in 2020 and supplements the earlier Segregated Accounts Companies Act enacted in 2000.

“This demonstrates that the jurisdiction is willing to listen and engage with the industry to provide solutions. This legislation has provided the ILS market a unique and flexible corporate structure which allows for the segregation of assets and liabilities into distinct incorporated segregated accounts, offering enhanced asset protection and operational efficiency and is being embraced by the ILS industry and investors,” James explained.

At the same time, the CUO notes that the Bermuda Monetary Authority (BMA), the island’s regulatory body for financial services, has demonstrated a rigorous but pragmatic approach to supervision and regulation of the ILS market, which according to James, has helped create a “stable and reliable environment for both ILS practitioners and a jurisdiction in which investors are willing to put their money.”

He continued: “Bermuda has also created a highly efficient ecosystem within which reinsurers, ILS funds, insurance managers and legal service providers can transact business. This is exemplified by the fast-track, seven-day listing process for insurance-linked securities on the Bermuda Stock Exchange, which lists approximately 92% of the global cat bond market.

“MultiStrat believes that the island will maintain its dominance of the ILS market as it broadens beyond cat ILS into casualty and specialty lines of business. That said, no jurisdiction can afford to be complacent; casualty ILS Insurtech Ledger chose the Cayman Islands for two new entities last year.”

Moving beyond Bermuda, James also discussed what he believes are some of the biggest challenges and opportunities for the casualty and broader ILS market as it looks to expand.

“Challenges for the casualty ILS market are often based on misconceptions, partly due to practitioners not explaining the product adequately. A fear of the impact of a zero-interest environment is one concern, but duration matching of assets to liabilities means this isn’t an issue in the current high-interest rate environment and won’t be anytime soon,” James said.

He continued: “At any rate, the typical five-to-10 year duration of non-cat ILS means they will “outlive” any period of zero or negative rates. What’s more, investors aren’t limited to risk-free rate return products. Assets that can be deployed to collateralize non-cat ILS structures can generate significant returns, even in a zero-interest rate environment, and these can be enhanced by the leverage that can be created by appropriate structuring.”

Notably, James states that casualty reserve strengthening in the United States has worried some potential investors.

“However, this isn’t a cross-class, universal phenomenon but often more a reflection of an individual company’s underwriting and reserving strategy,” he added.

On the other hand, social inflation remains a challenge within US casualty, but according to James, the risk can be mitigated by skilled portfolio managers and underwriters through appropriate risk selection, structuring, curation of diversified portfolios, and by effective claims handling and legal strategies.

Moving to cat ILS funds, James explains, “one barrier to growth beyond the prevalent $10 billion or so assets under management “ceiling” is that only certain structures are appropriate for these funds. The need to be fully collateralized to limits, with the only leverage being created by the premium, which in itself may potentially incentivize riskier, high rate-on-line (RoL) transactions. Collateralization to limits makes layers with reinstatements and those with low RoL less appealing, so there’s a lack of single-shot and aggregate layers, whether in the form of cat bonds, parametric covers, ILWs, or retrocession, available at acceptable pricing.”

He added: “Geographical concentration risk – Florida comes to mind – is another challenge, but various strategies are being deployed to alleviate this, including the use of rated reinsurance fronts. Equally, continued growth of the market, including innovation in areas such as parametric cover should also facilitate continued growth.”

In addition, the CUO also highlights how there has also been some well-publicised issues surrounding the validation of collateral, which notably was a setback for the whole ILS market.

He explains that MultiStrat, as well as other companies have responded rigorously by introducing additional controls around collateral, such as secured, encrypted communication for all counterparties.

“The ILS sector is now stronger for it and confidence has returned,” James said.

As for the opportunities within the casualty and ILS market, James notes that increasingly, buyers are seeking whole-account quota share on a multi-year basis and a more diverse array of reinsurance solutions as they become more sophisticated about capital management.

Ultimately, it appears that investors are looking for superior returns and products that possess little or no correlation with wider financial markets.

“ILS will continue to help to close the gaping global protection gap across insurance classes and are applicable to multiple lines. The development of ILS-specific regulation should help the growth of the market in new centres, such as the UK,” James added.

Furthermore, James also discussed what new innovations and structures are currently emerging within the casualty ILS market.

“Casualty modelling arrived on the scene relatively late, but the modelling ecosystem is growing and improving rapidly, giving investors more confidence. Predictive analytics are helping, incorporating real-time data and historic insights, to help anticipate this rapidly changing risk.”

On the other hand, innovations within casualty ILS structuring is also generating interest and demand among investors.

According to James, these include “forward exit options, fixed commutations, and traditional legacy solutions, which can be built into the contract at the outset. These facilitate participation by series funds and those that need a finality solution in order to invest. All in all, the product is getting increasingly sophisticated and appealing to an ever-wider range of investors.”

And lastly, James also addressed whether he sees ILS capital playing a larger role in the broader casualty space in the future.

“Some casualty business will flow away from traditional reinsurers, which are giving siloed coverage for isolated lines of business, into the ILS market but in the main, casualty ILS offer a path for the entire casualty market to grow.

“Many buyers aren’t purchasing the right limits in the first place, new liabilities associated with technological innovation, climate change, or transition risk, are emerging constantly, and with social inflation pushing jury verdicts up, demand for casualty cover will continue to rise. It took cat ILS approximately 15 to 20 years to achieve a penetration rate of 30% to 40%, and we believe the casualty ILS market could get there in about half that time.”

“MultiStrat is looking forward to playing an integral part in this growth story and continued success in collaborating with brokers, cedants and investors on mutually satisfactory reinsurance opportunities in the casualty space,” James concludes.

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

Bermuda to remain a key innovator as ILS broadens beyond cat: MultiStrat CUO was published by: www.Artemis.bm
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MLC Asset Management, an Australian investment arm of Insignia Financial Group, has launched a new multi-manager insurance-linked securities (ILS) fund offering, the MLC Reinsurance Investment Fund, which marks the firm’s first dedicated ILS fund strategy that is being offered to institutional investors.

MLC Asset Management has been an allocator to insurance-linked securities (ILS), both catastrophe bonds and private reinsurance strategies since 2007.

In this time the investment manager has allocated to ILS products from its range of multi-asset and alternative funds, with reinsurance-linked assets making up a component of many of these.

The driver has been adding diversification and a source of relatively uncorrelated returns, which has worked well for MLC and its clients over the years.

Now 17 years into investing in ILS and reinsurance, MLC’s track-record has been impressive with a 8.3% annual return (in AUD) over that period. The strategy has also outperformed cash for 16 out of those 17 years.

As a result, MLC has around AU $3 billion allocated to the ILS asset class across its strategies and has now opened up this track-record to other Australian institutional investors looking for a locally managed, dedicated ILS fund strategy.

Launched for 2025, the MLC Reinsurance Investment Fund has been seeded with approximately AU $250 million in capital by Australian institutional investors.

Taking a fund of funds approach, this multi-manager portfolio is the first time MLC has packaged its alternatives expertise for the external investor market in Australia and the company sees it as an important milestone in the growth of the alternatives segment of its business.

Artemis spoke with Gareth Abley, Co-Head of Alternatives at MLC Asset Management, to learn more about the first dedicated ILS fund launch by the company.

“We’re out essentially offering that multi-manager ILS capability we’ve developed in-house to other people who may find it beneficial to piggyback off what we’ve done and what we’ve learnt over the last 17 years,” Abley explained.

Discussing the broader ILS strategy and how that’s developed at MLC, Abley said, “It’s been a remote-risk oriented strategy since launch and has generally done pretty well, so we’ve made money every year in the last 17 years.

“It’s been a strategic allocation and the track record has been good, which has meant that our stakeholders have been comfortable sizing up when it makes sense to size up, such as in the last couple of years when spreads have widened. It’s generally been a success story asset class for us.”

On why now, for the launch of the first dedicated ILS fund for external clients, Abley said that encouragement has come from both clients and internal stakeholders at MLC.

“The business encouraged us to see if we can commercialise these capabilities, so we’ve recently created a commingled fund which we’ve seeded with $250 million of external capital from an institutional investor. So we’re now out essentially offering that multi-manager capability.”

Discussing the MLC Reinsurance Investment Fund strategy, Abley said, “This specialist reinsurance fund allocates across quota shares, collateralized reinsurance and cat bonds.”

Abley said there are four separate ILS fund strategies currently being allocated to through the MLC Reinsurance Investment Fund, “We know that manager dispersion in the asset class can be very wide, even for strategies with ostensibly similar EL profiles. Plus our view is that the nature of remote risk reinsurance is that luck can dominate skill over many time periods. So if an investor wants to capture the risk premium reliably we think multi-manager is the best way to do that.”

Further explaining that, “It’s designed to play across the ecosystem, based on where the relative value is most attractive and using different specialist managers, some of whom have more expertise in certain areas.

“Some are more focused on collateralized reinsurance, some quota shares, some catastrophe bonds, so that’s the way we’ve managed our ILS strategy it for over a decade, having the multi manager approach and playing across public and private instruments.”

Fund of fund strategies are less common in ILS still, in part because of certain challenges presented by fee structures and the costs of allocating across multiple strategies.

But Abley feels that with MLC’s scale already in ILS and its long relationships with some of the leading ILS fund managers, it has constructed a compelling offering for institutions.

“I think that’s part of the value proposition because we’re a very big investor who’s been around the ILS asset class for a long time,” he explained.

“As you can imagine, the mandates we’re running with, you know with $3 billion plus aggregate AUM, are pretty big. As well as this scale, we’re a long-term investor in the asset class, and the stability of our capital has strategic value to our counterparties. All this means win-win commercial arrangements with high quality counterparties. So we think the maths for external investors – in terms of portfolio quality, outsourced multi-manager and look through fees is really attractive.

“Investors can get instant diversification, with access to both the public and private segments of ILS, while the multi-manager approach means the fund will generate broad reinsurance returns from a single allocation,” Abley stated.

MLC launches multi-manager ILS fund, its first dedicated reinsurance strategy was published by: www.Artemis.bm
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Consecutive record years of cat bond issuance, a fast start to this year, a broadening investor and sponsor base, and expansion into perils like cyber and casualty, means it’s an exciting time to be in the insurance-linked securities (ILS) space, according to Jason Bolding, CEO of Gallagher Securities.

Bolding recently took over as CEO of Gallagher Securities, the ILS and capital markets broker-deal division of reinsurance broker, Gallagher Re.

With Bolding now at the helm, and the ILS market in a phase of impressive growth, Artemis spoke with the CEO about his new role and the outlook for the cat bond and broader ILS market in the months ahead.

He explained that as CEO, part of his mandate is to ensure that Gallagher Securities is working very closely with broking colleagues across Gallagher Re and the wider Gallagher group, ensuring the firm has capabilities across the full spectrum of products where it can assist clients.

“To that end, we also want to continue to expand our capabilities beyond the typical ILS transactions. So, for instance, we have colleagues in London that have had some recent success in syndicate formation and Lloyd’s. We want not only to continue that work, but expand on it, so that at the end of the day, all we’re doing is matching risk to capital in whatever form that takes place,” said Bolding.

Last year, cat bond issuance hit a new annual high of $17.7 billion, and Artemis’ data shows that issuance in the first quarter of 2025 is on track to be a record for the period, which suggests another busy 12 months for the marketplace.

Bolding explained, “What you’ve seen the last couple of years is it was relatively quiet in the first couple months. The deals that came first got great execution. I think as advisors, everybody had the same idea, let’s push the calendar forward.

“2025 is really off to a fast start. It’s been a very active first month and a half. We see that investors continue to have capital to put to work. There’s a lot of demand for coverage from sponsors at the same time. So, we’ll see how that supply demand dynamic plays out over the next few months.

“But we would anticipate that it’ll remain really active all the way up until hurricane season. And then, of course, it is really hard to predict what’s going to happen in Q4 at the moment, but I would expect a similar level of activity that we’ve seen over the past couple years, which has been pretty active. To that end, I can’t see why we wouldn’t be talking about a record year again. But of course, I’m saying that in February, so time will tell,” he added.

The impressive growth of the cat bond market has been driven by new and repeat sponsors, and Bolding explained that there’s various reasons a cedent looks to the capital markets.

“Whether it’s finding more stable, long-term capital to help reduce volatility, provide cycle management, or just to get access to a broader pool of capital and create competition. Additionally, there’s been no shortage of cat events, which really highlights the need for coverage.

“When we look at the cat bond specifically, it certainly takes more work to issue a cat bond than to do traditional reinsurance, but there’s some muscle memory to the process, so being a regular sponsor can help. We see that once a cedent starts to incorporate ILS solutions into their regular reinsurance purchasing strategy, they generally will continue to do so down the line.

“We’re working with a few sponsors right now that are considering their first cat bond, just as a way to access different pools of capital. I think they’ve seen peers do it, and they want to replicate that success,” he said.

Of course, the cat bond market, while growing, is just one part of the broader ILS market, and Bolding emphasised that there’s a place for all forms of transferring risk in the market, whether that’s the liquid form, like cat bonds, or private transactions.

“I think the private side has always been a bit more in the money. So, naturally, the performance suffers a bit with active years, not only in terms of losses, but also from increased trapped capital, which puts a drag on returns.

“But with back to back, really positive years of returns that we’ve seen, we have heard some managers have started to have some recent success in capital raising on the more private side. Time will tell if that’s sustainable, especially given the start of the year that we’re having with the wildfires.

“On the sidecar side, we continue to see cedents look to form partnerships with investors through sidecars and related vehicles. And at the same time, you see this dynamic where investors have a real desire to get access to the premium flows that insurance risks can deliver. So, now, interest is expanding beyond just your typical property cat risk that we’ve always seen, now you see casualty ILS deals and so on. I think that bodes well for the sidecar market going forward as well,” said Bolding.

Readers will be aware that while nat cat risks still dominate the ILS world, other exposures such as casualty and cyber are increasingly coming into the fold, with appetite growing among sponsors and investors.

“It’s a really exciting time to be in ILS,” said Bolding. “We’re talking about cat bonds having back to back record years, another big start to the year, investors expanding into perils like cyber and casualty. It’s not only the typical ILS investors that are participating; we’re expanding the breadth of ILS investors that are out there too.”

“And, at the same time, that same expansion is happening on the sponsor side, too. You’re seeing private equity firms and corporates and governments and all types of new and different sponsors come to the market.

“We’re in a good state, and really, it’s a two way market, where you have the ILS markets really working for both sides of the trade. You have sponsors and investors really finding value. I think that means that we’ll see a continued expansion of the activity as we go forward,” concluded Bolding.

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

It’s a really exciting time to be in ILS: Gallagher Securities CEO, Bolding was published by: www.Artemis.bm
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Following a record year for the catastrophe bond market in 2024, with issuance increasing by over $1 billion to a new annual high of $17.7 billion, 2025 is set to be another busy year for the market, according to Brad Adderley, Partner at global law firm Appleby.

Artemis spoke with Adderley ahead of the launch of our Q4 and full year 2024 catastrophe bond and related insurance-linked securities (ILS) market report.

Annual cat bond issuance increased to a record $17.7 billion as the extremely active first half of the year and final quarter more than offset a quiet third quarter for the space.

This marked the second consecutive year in which annual cat bond issuance managed to set a new record, as well as being another year which saw activity levels swell in the final quarter ahead of the key January 1st reinsurance renewals.

Reflecting on this, Adderley discussed with Artemis what to expect in the cat bond market in the opening months of 2025.

“Clearly, issuance in 2024 has been very impressive and strong. But, is 2025 going to be busy? All I can tell you is that every day we are sending out a quote for a new cat bond. It’s crazy, and it’s showing no sign of slowing down,” he explained.

We’re now in February, and cat bond activity so far in 2025 has been very strong, and is already on track for record first-quarter issuance, according to data from the Artemis Deal Directory.

Back to Q4 and full year 2024, and much like any asset class, the cat bond market continues to demonstrate a strong balance of supply and demand, with deal sizes and final pricing of cat bond notes in the last quarter of 2024 reflecting sustained investor interest.

Additionally, nearly all cat bond tranches issued during the period were upsized during marketing, while the large majority of notes issued also priced below midpoint of initial guidance, by as much as 20% in some cases, which clearly points to strong demand from the investor base.

Addressing this, Adderley said: “So, what we’re seeing is a flooding of the market, but as there’s also better investors in the market to buy the product, the issuers can decrease price because everyone is saying please give it to me, please give it to me. And, by doing that, the sponsors keep on saying, I’ll give you a lower quote.”

He continued: “Really, it’s just in a constant cycle. We saw at the start of last year a couple of cat bonds failed to get over the line, and let’s be honest, the prices are never too low. So, again, it’s just a constant cycle between supply and demand. And, let’s not forget that one or two of the largest ILS players in the market now are just cat bond funds, so they must be all over every single transaction.”

Adderley also stressed that the anticipated “crazy” start to 2025 will also be characterised by new life reinsurer formations and sidecars for life, casualty or general business.

He explained: “I have enough new formations that will slip into the new year along new structures waiting to be started which will begin in January and submitted soon thereafter.”

Interestingly, Adderley believes that the cat bond market is going to see a lot of new issuances and structures throughout 2025, as well as announcements of sidecars too.

“So, for me, I see as many interesting, complicated, transactional structures in the first two months of 2025. Whether or not March is busy or quiet, we’ll have to wait and see,” he concluded.

All of our catastrophe bond market charts and visualisations are up-to-date, so include this latest quarter of issuance data.

We will keep you updated on all catastrophe bond and related ILS transaction issuance as 2025 progresses, and we’ll report on the evolving trends in the cat bond, ILS and collateralised reinsurance market.

Cat bond market poised for another strong year in 2025: Brad Adderley, Appleby was published by: www.Artemis.bm
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The awaited launch of the Brookmont Catastrophic Bond ETF is nearing and Artemis spoke with Ethan Powell, Principal & Chief Investment Officer of Brookmont Capital Management, LLC and Rick Pagnani, co-founder of King Ridge Capital Advisors LLC, to learn more about the strategy and their thoughts on how they see it developing.

Recall that a definitive prospectus was recently filed with the SEC for the Brookmont Catastrophic Bond ETF, which will have a ticker symbol of ILS and will be listed under on the New York Stock Exchange (NYSE).

It will be the first catastrophe bond fund strategy to be exchange-listed and traded, meaning liquidity opportunities for investors are set to be far more frequent than we see with most cat bond investment funds.

The fund is being launched and managed by Brookmont Capital Management, LLC, while recently founded ILS manager King Ridge Capital Advisors LLC will be the sub-adviser to the cat bond ETF, effectively managing the portfolio.

With liquidity considerations a key aspect for any ETF, we wanted to explore what this means for the Brookmont Catastrophic Bond ETF and how it will be managed, while also diving deeper into issues related to the portfolio management of the strategy and the manager’s ambitions for the strategy.

1. Perhaps we can start with a quick explanation of the strategy, why it’s different and why investors should care?

Rick Pagnani, King Ridge Capital Advisors: “The ETF is designed to offer institutional investors, asset managers, and high-net-worth individuals a liquid, transparent, and easily tradable way to access the catastrophe (Cat) bond market—an asset class that has historically provided accretive risk-adjusted returns with low correlation to traditional markets.

“Historically Cat bonds have exhibited wider spreads than high-yield credit, yet they remain difficult to access due to structural complexities, knowledge and institutional entry barriers. Further, it is challenging to build a diversified catastrophe bond portfolio for a typical investor on their own.  By packaging them into an ETF, we aim to lower some of the barriers to entry.

“For investors seeking uncorrelated income, portfolio diversification, and resilience in volatile markets, ETF’s may provide an efficient way to allocate capital to this alternative asset class. While we advocate for a long-term strategic allocation, the ETF structure allows for flexibility—letting investors enter and exit positions more easily.”

Ethan Powell, Brookmont Capital Management: “We are hopeful that the ETF will provide greater visibility and scale to an asset class that will play an increasingly important role. This market is critical in pricing and distributing the risks associated with the increased cost of owning hard assets as climate volatility accelerates.”

2. How close is the fund to its launch and what other tasks need to be completed to get the strategy listed on the NYSE and in front of investors?

Ethan Powell: “We have an effective prospectus on file with the SEC. We are currently finalizing launch partners for seed as well as providing secondary liquidity for the product. We anticipate launching the ETF with the optimal amount of seed capital and believe this will be reached by March.”

3. How important is democratising access to the asset class, in your view, by making it more readily available and providing daily liquidity through an ETF?

Rick Pagnani: “It’s critical. Cat bonds have a compelling role in diversified portfolios, and we’ve conducted numerous portfolio optimizations that consistently point to an allocation to this asset class. Institutional investors recognize this, and awareness is growing among family offices and HNW advisors. However, actual adoption has been slow due to accessibility challenges.

“While Cat Bond mutual funds and interval funds have seen growth, there may be additional pent-up demand. Conversely, ETFs are widely adopted for their transparency, liquidity, and cost efficiency. By structuring Cat Bonds in an ETF format, we aim to improve accessibility. Additionally, ETFs are compliance-friendly, making it more straightforward for institutional investors to allocate to Cat Bonds within existing mandates. With the ability to trade on a variety of platforms, our ETF significantly broadens access to this unique market—helping to bridge the gap between demand and actual participation.”

Ethan Powell: “By increasing participation in the asset class and creating a more liquid transparent fund vehicle we believe that the public will gain a better understanding of the risk associated with living, building and working in higher risk geographies. As evidenced by the dialogue after the California fires the public is confused by the role government, insurers, reinsurers and investors play in underwriting and assuming risk. This fund gives us a venue to have greater dialogue around live cat bond events as well as longer term trends in risk pricing and transfer.”

4. Do you believe this could be transformative for the sector in any way, and others may look to follow suit?

Rick Pagnani: “Absolutely. We believe this ETF could contribute to greater awareness of the asset class, though broader market adoption will depend on demand, liquidity and event driven factors. If more investors gain exposure to Cat Bonds through regulated structurers, trading volumes and market participation could increase over time.

“Beyond ETFs, we see this as the beginning of a broader ecosystem. As liquidity and participation grow, we anticipate the development of complementary products.

“A larger, more liquid Cat Bond market is also significant from a macro perspective. The insurance gap—the shortfall between economic losses from disasters and insured coverage—continues to widen, and the traditional insurance industry alone may not be able to close it. The capital markets may play a role in addressing this gap if the right products and market conditions exist.”

“Our goal is not just to launch a product but to contribute to the evolution of this asset class—expanding its reach, increasing market depth, and ultimately driving innovation in risk transfer solutions.”

5. With daily liquidity comes certain challenges, given the asset class is not always as liquid as it needs to be. ETF’s typically work with market-makers and liquidity providers. Who are you working with, what will their role be and how important is this to the strategies success?

Ethan Powell: “We are working with traditional ETF market participants as well as Cat bond trading desks to facility an orderly market in the secondary. However, most of our fundraising efforts are geared towards larger strategic allocators that can transact at NAV in the primary market in increments of one million dollars or more.”

Rick Pagnani: “You are correct. One of the unique benefits of launching an ETF in this asset class is the involvement of a broader ecosystem of market participants, such as market makers and authorized participants. We are in active dialogue with several partners and expect them to play a valuable role in facilitating a robust market.”

6. There are other items of note in the prospectus that can help you in managing liquidity, such as being able to allocate to a broader range of assets/securities in reinsurance than cat bonds alone. What’s your feeling for how the portfolio mix will develop over time?

Rick Pagnani: “Per the ETF’s rules and regulations, we will maintain a minimum 80% allocation to cat bonds. We do have the latitude to invest in broader (re)insurance-related securities. These allocations will allow us some flexibility to manage liquidity and will likely shift in response to varying market conditions.”

Ethan Powell: “We anticipate having position sizing of around 2-4% and being well diversified based on geography, peril and trigger types.  Our goal is the provide our investors Cat bond market exposure so keeping cash drag and tracking error down is key.  However, we have an obligation to ensure we have sufficient liquidity to meet redemptions either in cash or in kind.  This liquidity goal will likely ebb and flow in importance based on the market environment and the likelihood of cat events impacting our holdings.”

7. Do you feel the need for liquidity could raise portfolio management challenges, and how do you intend to overcome them?

Rick Pagnani: “Managing liquidity is a key consideration, but we’ve structured the ETF to navigate these challenges effectively. The ETF format requires us to construct and maintain a diversified portfolio across multiple geographies and perils, ensuring a balanced approach to risk and liquidity.

“We’ve dedicated significant research to understanding liquidity dynamics in the Cat Bond market, including how trading volumes shift under different market conditions. This research informs our portfolio management strategy, allowing us to adapt as needed while maintaining an optimal balance of yield, risk, and tradability.”

Ethan Powell: “We view the ETF as more than just an access point—it’s a step toward enhancing overall market liquidity and transparency. By broadening investor participation and facilitating price discovery, we believe the ETF can contribute to a more dynamic and efficient marketplace for Cat Bonds.”

8. It feels like the market could be on the cusp of something right now, given the new entrants and types/sizes of investors looking at the space. How important is it that the cat bond market work towards becoming more liquid to be able to achieve its potential, in your views?

Rick Pagnani: “Liquidity is critical if the ILS market is to scale and meet the growing demand from institutional investors. As I mentioned earlier, the widening insurance gap is a major economic concern. Rising climate risks—such as flooding and wildfires—are making traditional insurance more expensive or even unavailable, which in turn impacts property values and economic stability.

“Capital markets can play a crucial role in closing this gap, but only if the right investment structures exist to attract institutional capital at scale. A more liquid Cat Bond market would support price discovery, improve trading efficiency, and ultimately make the asset class more investable.

“By introducing an ETF structure, we would be helping to build the foundation for a more dynamic, scalable market.”

Ethan Powell: “We are seeing the synergy of evolving market trends. First, we are seeing substantial growth in alternative assets. I believe recent figures suggest that AUM today is around 25 trillion dollars. If you simply look at investor’s accessibility to private equity, private credit, infrastructure & real estate, these investments were historically reserved for institutional or super HNW investors. Today they are available through varying structures to Main Street investors. This has had a tremendous impact on the liquidity of those respective markets.

“Secondly, global ESG asset growth has been tremendous. The last figure I saw estimated that global AUM was north of 30 trillion dollars. Investors today are certainly aware of Environmental, Social and Governance and their investment priorities are reflected in these numbers. Cat Bonds find themselves at the intersection of both growth trends. The demand for alternative structures coupled with shifting investor preferences particularly as it relates to the environmental issues. It seems like hardly a week passes without another major natural disaster. Investors are paying attention. I believe that this convergence has the potential to drive awareness and positively affect the liquidity dynamics of the Cat Bond market over time.”

9. Where in the investor universe do you expect to see the most demand for the cat bond ETF (as in what types of investors)?

Rick Pagnani: “We anticipate strong demand from institutional investors, family offices, RIAs, and high-net-worth individuals looking for liquid access to alternative, non-correlated assets.

“First and foremost, institutional investors—such as pensions, foundations, endowments, and sovereign wealth funds—now have an efficient way to allocate to Cat Bonds. Family offices and HNW RIAs will also find value in the ETF’s accessibility, allowing them to integrate Cat Bonds into diversified portfolios.”

Ethan Powell: “Additionally, we see a compelling use case for asset managers, particularly those overseeing fixed-income portfolios—whether in core-plus, non-traditional, or multi-sector bond strategies. Alternatives and multi-alternative fund manager may also see investment merit from an ETF structure. A Cat Bond allocation within these strategies has the potential to enhance risk-adjusted returns and improve portfolio diversification.”

10. What would your goals/ambitions be for the fund one year from launch?

Rick Pagnani: “That’s a great question—one we discuss often. Our primary goal is to increase awareness and access to the Cat Bond asset class. In a market where asset allocators are actively seeking truly non-correlated alternative strategies, we want this ETF to be a key part of the solution.”

Ethan Powell: “Success in the first year isn’t just about AUM growth—it’s about educating the market, expanding participation, and demonstrating the value Cat Bonds can bring to diversified portfolios. If we can help institutional investors, asset managers, and advisors better understand and integrate this asset class, we’ll consider that a significant step forward.

“Ultimately, we want to lay the foundation for long-term adoption, helping to drive liquidity, transparency, and broader acceptance of Cat Bonds within mainstream investment portfolios.”

11. Before we wrap up is there anything else investors should know?

Rick Pagnani: “Well, our compliance department wouldn’t be too happy if I didn’t mention a few key things!

“First, while Cat Bonds have historically provided attractive spreads and diversification benefits, past performance is not indicative of future results. Like any investment, there are risks, and in this case, those risks are tied to catastrophic events. If a major disaster occurs, investors could experience losses, including principal loss.

“Second, liquidity is something to keep in mind. The ETF structure allows for daily trading, but the underlying Cat Bond market does not always have the same liquidity, particularly after significant events. In times of market stress, bid/ask spreads may widen, and exiting a position may not be as seamless as in more liquid asset classes.

“Third, suitability matters. Cat Bonds and Cat Bond ETFs are not appropriate for all investors. These investments have unique characteristics, including complex event triggers, variable pricing, and limited secondary market trading. Investors should carefully consider their risk tolerance, investment objectives, and liquidity needs—and as always, consult a financial professional before investing.

“And finally, while we believe Cat Bonds can play a role in certain portfolios, the future of the market depends on many factors—including investor adoption, regulatory developments, and broader economic conditions. We’ll be keeping a close eye on all of that as this ETF evolves.”

Ethan Powell: Well said!

Cat Bond ETF liquidity Q&A: Brookmont Capital Management and King Ridge Capital Advisors was published by: www.Artemis.bm
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A renewed interest in catastrophe bonds is being seen across the insurance-linked securities (ILS) market, as spreads have started to become more “attractive”, which indicates a favourable market entry point for new sponsors, according to Sandro Kriesch, Head of Insurance-Linked Securities (ILS), and Sophie Worsnop, Assistant Vice President, Acrisure Re Corporate Advisory & Solutions (ARCAS).

The reinsurance broker recently conducted a study, exploring how spreads for cat bonds that were issued throughout 2024 have gone on to develop, however the firm primarily focused on just US wind exposed bonds.

“As 2023 calendar year closed, final spreads exhibited a slight upward tendency in comparison to the initial spread guidance, indicating an anticipation of a hard underlying market,” Kriesch and Worsnop said.

“The first quarter of 2024 shifted towards a softer market, followed by a return to a harder stance in the second quarter, culminating in a substantial hardening at the end of Q2. Notably, some issues were not placed due to high pricing expectation during May and June (Titania 2024-1 Class B and Gateway 2024-3).”

When it comes to the fourth quarter of 2024, it’s important to highlight that no publicly available US hurricane exposed issues were observed during October, therefore ARCAS’ analysis only focused on the months of November and December.

According to Kriesch and Worsnop, these months exhibited a “very different picture”, where the final spreads were materially lower than the initial spread guidance mid-point, which signals a clear market softening.

“The factors contributing to the shift in sentiment are somewhat speculative, but we present two suppositions: 1) rumours of a softening in the underlying traditional reinsurance market, leading to an expectation of reduced pricing in cat bonds from buyers, and moreover 2) an approximate 2.5bn USD of maturing issuance during Dec 2024 and January 2025, driving investor interest and thus concessions on pricing reductions,” commented Kriesch and Worsnop.

“As more data from the 1/1 renewals becomes available, the 10% decline of final spread to initial spread guidance in both November and December becomes better contextualised within the broader reinsurance market, demonstrating the strength of the marriage of cat bonds with the underlying traditional placements.”

We discussed this in our latest quarterly cat bond report, where it showcases that on average, across the 29 tranches of notes that we have full pricing data for, all but three saw their final spread come down from the mid-point of initial guidance, which resulted in an average spread change of -10.8%.

Furthermore, Kriesch and Worsnop also explained how the broker’s study addressed how the perception of risk changed between the first half of 2024 to the fourth quarter.

“We observe two aspects during this period. First, the intercept: the price for capacity has come down substantially – actually significantly at the 99% level – and secondly, the slope: the risk sensitivity has roughly remained stable, indicating a continuous sensitivity to more (or less) risk (we also see a significant overall shift between the samples.).

“Thus, we would argue that the market for US Wind exposed cat bonds has become softer in terms of its pricing. In simple terms: sellers of capacity are generally willing to accept risk at lower spreads. It is worthwhile noticing that the 4Q24 sample is strongly aligned in that (with one exception) bonds’ spreads are priced very closely to the regression suggesting an agreement in principle of how risk should be remunerated; on the other hand, the 2H24 sample represents a market which seemed much more unsure regards the fair price of ceded risk as data is much more dispersed.”

They both went on, explaining that the firm used spread changes from initial guidance to final spread and the regression of expected loss vs spread of US hurricane exposed cat bonds during 2024 as “indicators of a softening market.”

“The latter shows strong changes supporting the change in risk sensitivity during that period towards a softer Cat bond market. On the other hand, the difference in final spread and initial spread guidance showed a clear change from May 24 to December 24.”

Adding: “The sizeable spreads that were paid led to some companies pulling (or postponing) their issue – however, come Nov/Dec 24 spreads are now much more benign.”

“We are encouraged by the renewed interest in cat bonds, not only because the spreads have become more attractive but also because the recent catastrophic event in California has highlighted the potential for unexpected capacity shortages in the traditional reinsurance market,” Kriesch and Worsnop concluded.

Renewed interest in cat bonds indicates favourable market entry point for new sponsors: Acrisure Re was published by: www.Artemis.bm
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Steel City Re is the world’s only provider of parametric reputation insurance offerings, leveraging a reputational value index that delivers more stable and higher returns for reinsurers and insurance-linked securities (ILS) investors, according to co-founder and CEO Nir Kossovsky.

Pittsburgh, Pennsylvania-headquartered Steel City Re is a reputation risk specialist, and the world’s only source of parametric, ESG, and reputation insurance solutions.

Founded in 2007, the company has been engaged in reputation measurement since 2001. It acquires data from a commercial data aggregator, which it then transforms into synthetic measures of reputational value through computer-driven algorithms that involve no human subjective influence. They are currently indexing reputation values for around 7000 public companies each week.

All of the firm’s insurance solutions are based on their reputation value index, and with demand for reputation insurance on the rise, we spoke with CEO Kossovsky about the index, how it works for protection buyers, and how the returns could be attractive to reinsurers and ILS investors.

Kossovsky explained that until recently, reputation insurance was shunned the same way as D&O liability insurance was in the past, in that directors of companies understood that it provided protection from real liability risk, but simply didn’t want to let anyone think that they might actually have a liability risk. Eventually, this attitude changed, and demand for liability insurance surged and led to the $25 billion market it is today.

“Fast forward 40 years, reputation insurance, the lesser cousin of liability insurance is now finding its place in the sun,” said Kossovsky. “Board members have moved beyond talking about reputation risk. In the past few months, reputation insurance has become a major topic of conversation.”

Like bankruptcy, attitudes change at first slowly, then suddenly. Interest first took hold during the 90s when that financial crisis of liquidity was triggered by a reputation crisis. This led regulators to realise how big the risk is to financial institutions, designated reputation risk a “named peril,” and subsequently demanded that banks report on reputation risk and how they manage it.

The issue then was how to accurately measure the risk, which is where Steel City Re came into the fold. Building on principles of behavioural economics and epistemology, it defined reputation value as the value created by stakeholders in the expectation of a benefit, and reputation risk as a threat to that value. The company created an index that captures that notion of value through forward-looking financial measures that are sensitive to issues of reputational significance: ethics, innovation, safety, security, stability, and quality. It created a measure of risk by quantifying the volatility of the value measure.

“We formalized a long-held tacit understanding that in the modern finance where intangible asset value dominates, reputation value usually rhymes with stock price,” he said, “while ensuring our insurance products did not become financial derivatives.”

This index provided Steel City Re with an independent measure of the intrinsic value of a firm based on the expected cash flows, which empirically did not always align with the stock price. This created an unexpected opportunity for arbitrage where value would be realised when those metrics converge.

“That’s how we first turned our model of reputation value into a business. We started selling data of reputation value and allowed various hedge funds to arbitrage,” explained Kossovsky.

“The next step was to do our own arbitrage. We designed an equity index comprising up to 57 companies—three companies from each of the 19 sectors. The key feature was that the companies had high reputation values and low stock prices. We named it the RepuStars Variety Corporate Reputation equity index (REPUVAR), which is now calculated by S&P Global,” he continued.

While the company’s model of reputation value made for an interesting investment thesis, the performance of the index over time affirmed the value of the metrics that came to underpin Steel City Re’s parametric insurance products.

“The algorithms for our reputation value index, our equity portfolio long and short indices, and our parametric insurance loss indices have been stable for two decades. The engineering begins with the raw data. We started with about 5500 companies that qualified for reputation value index calculation. At this point, we are averaging about 7200 companies each week whose data are incorporated into our system. We have an actuarial base of almost 9 million measures of reputation value,” said the CEO.

“When applied to insurance loss determination, our models operate like any other index. There’s a historic volatility to each individual company’s measures, which creates the normal operating boundaries, and if an insured company’s value falls below the normal operating boundaries, then they’re by definition impaired. The degree to which we allow an impairment before it triggers a loss—like a deductible— is a major factor for pricing an insurance solution. At the technical level, we offer a routine, run-of-the-mill, indexing-based insurance solution,” he added.

So, how might the index-based solutions be attractive to reinsurers and ILS investors? According to Kossovsky, this is threefold.

“We can price to target loss ratio. First, there’s much more stable returns because of lower loss variance. That’s because we have insight into the risk of each company individually, as well as on a portfolio basis. The single name risk data enable objective discriminatory underwriting, which means we can exclude outsized risk, objectively. Second, we see higher returns because our single-name data helps us with more precise pricing that dynamically adjusts for risk. And the third reason is that we can maintain underwriting discipline to sustain that target loss ratio. Our proprietary underwriting and pricing tools—our intellectual properties—are hard barriers for a competitive market to overcome.

“So, sustained loss ratios: stable returns, higher returns, and IP-protected extended returns over years,” explained Kossovsky.

Currently, interest in and demand for reputation insurance is on the rise, and this appears to be a national trend, as highlighted in a recent National Association of Corporate Directors blog, Directorship Online, which states that interest in early December 2024 was almost seven times higher than the trailing five-year average. Undoubtedly, this has been made that much more acute by the assassination of the UnitedHealth CEO in early December in New York, Kossovsky told Artemis.

“Two things are now destabilizing the Nash equilibrium for reputation insurance leading to a sudden and rapid rise in demand. First, a range of issues facing companies make the risk itself more unmanageable, ungovernable, and most important, unpredictable. And personal. Perceptions of the reputation risk have shifted from something that affects companies to something that affects individual corporate board members and executives.

“Second, concern by directors about telegraphing a potential reputation risk at their firm—like the fear about telegraphing a potential liability risk at their firm before the 1980’s—has been swept aside by the acute sense of personal risk by individual directors, and that capacity is relatively scarce. Only the better risks will be covered. As Nobel Laureate Michael Spence explained, objective discrimination and scarcity enable our reputation insurance solution to signal quality (of governance),” he said.

The new issues driving demand noted by Kossovsky include the corporate management and governance chaos that have been heightened by the US elections in 2024.

“Chaos is the right word. One hotbed of reputation risk involves climate and social issues. These are the things that companies once pledged to advance for global betterment, and now they’re retreating. Board members have linked their personal reputations to their firms’ ESG postures, so there’s a lot of cognitive dissonance and concern,” he said. “Especially among stakeholders. Many feel betrayed. The result is an emotionally activated populace willing an abler to target directors’ reputation through action: boycotts, strikes, social license withdrawals and more. An angry man who felt betrayed went further when he gunned down an executive in the streets of New York in December.”

Moreover, he explained, board members surveyed by PwC each year, in 2024, more than ever before, said they’re less likely to support a colleague who got in trouble. In fact, 25% of those surveyed said they’d be very happy to jettison two or more of their colleagues from their boards.

“Furthermore, key institutional investors in January declared that they want to punish leadership for reputation damage. And, on top of that, a recent survey found that key institutional investors are prepared to punish directors at some company if they’ve had a crisis at some other company.

“So, you put all of that together, and you can understand how a corporate director’s perspective would flip. Instead of it being somebody else who might have a reputation scandal, the average dutiful director doing their job can now see themselves being caught between stakeholders and shareholders—who cannot be collectively appeased —and for lack of a better word, be scapegoated,” said Kossovsky.

“The moment the risk shifts from “the other gal” to “it could be me,” it becomes viscerally real. What we’re hearing from our brokers is that Board members are recognising these factors, and they’re sensing that this has suddenly become a very personal, real risk that could impact their own economic security going forward,” he explained “They now understand that the going forward cost of lost future opportunities will not be covered by D&O liability insurance.”

Interestingly, Steel City Re started hearing from brokers earlier in 2024 when some of these factors became palpable, and after the election, the company started to receive more discrete outreaches.

“Can we buy this without it necessarily being known? Can we do this quietly because of that concern about the Nash equilibrium and triggering a “run-on-insurance” and a premium spike? So, it’s a very interesting time right now, which, of course, makes it very interesting for investors as well,” said Kossovsky.

Steel City Re predicts reputation risk for its clients via its Resilience Monitor, a predictive report, and the firm’s experienced consultants help firms manage the risk through business process modifications, captive insurance, and ultimately transfer it through the reinsurer’s parametric reputation insurance solution.

To end, Kossovsky highlighted some of the industry-wide benefits of parametric structures and what the future might hold for Steel City Re.

“Parametric models are a fundamental platform because they allow a rapid response to emerging risk. You don’t need to have a history of loss; you need to have a history of the parameter that correlates with a loss. If the insurance industry wanted, they could turn parametric technology into something like the MRNA technology for vaccines and initiate the insurance equivalent of the Covid vaccine’s operation warp speed.

“With parametric technology, you could respond to any emerging risk in weeks. If you stopped thinking about balance sheets and started thinking about how the client looks at the problem. If the board likes a solution because they think it will provide financial resilience, then surely everybody else in the company will be comfortable with parametric solutions and so on. This is what the brokers are trying to tell the insurers. Insurers want to see an example of how this plays out in reality, and I think we are that example,” he said.

Adding, “So, we’re fortunate that corporate governance is facing so many challenges and individual board members are deemed fair game for long-term economic harm by customers, employees, regulators and investors—none of which is covered by D&O liability insurance. When risk is unmanageable, ungovernable, and unpredictable, the only solution you can rely on is insurance.”

Steel City Re’s reputational value index offers stable, elevated returns for investors: CEO Kossovsky was published by: www.Artemis.bm
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According to Thad Hall, Partner and Head of insurance-linked securities (ILS) Solutions at Augment Risk, the risk capital and reinsurance solutions broking firm, the ongoing growth trend with alternative capital is expected to continue throughout 2025, given the high returns for ILS relative to other assets.

Global credit ratings agency AM Best revealed that alternative capital expanded by 7% in 2024, reaching a remarkable US$107 billion in 2024.

“In the past two years the Swiss Re Cat Bond Index has risen 19.7% and 17.3%. This level is comparable to public equities and ILS investors get the added benefit of a low correlation to other assets,” Hall said.

Hall also told us what he is hoping to see take place across the ILS market in 2025.

“More ILS funds expanding their products to include casualty risk. Also private credit investors entering the ILS market. ILS is a form of risk financing; private credit can add an asset with low correlation to loans and achieve attractive returns,” he commented.

Looking back at 2024, it was a memorable year for the catastrophe bond and ILS market. In the fourth quarter of the year, $4.5 billion of cat bond and related ILS market issuance was recorded, which managed to take the full-year 2024 total to a record $17.7 billion, while the outstanding market reached a new all-time-high of $49.5 billion.

Hall explained what the industry learned in 2024 in regards to cat bonds insurance and capital management.

“Capital solutions are favoured by clients and investors. A holistic approach to managing capital for insurers and reinsurers through structured reinsurance and ILS can create material economic value over time,” he commented.

A key topic that is often discussed across the insurance and reinsurance space is artificial intelligence (AI), with many organisations expanding their use of the technology.

However, AI, which is more of an underdeveloped area across the ILS space, is expected to receive more attention in 2025, according to Hall.

“We are exploring ways to expand the use of AI in the ILS process. Augment Risk has a data and analytics team who assists the ILS deal team with loss and risk-based capital modeling. There is a collaboration between these teams and Augment Risk’s CTO to develop greater AI capabilities.”

Switching attention now towards the investment side, we asked Hall to explain what he believes investors will be focusing on throughout 2025.

He explained that Augment Risk is focusing on a note structure to finance stable portfolios of casualty risk, in which the notes will have a fixed maturity and may be supported by an equity layer.

“We are working with several investors who can transact in note format. We would like to see this structure gain more traction as an option to bring capital to transforming vehicles,” he added.

Alternative capital growth to continue in 2025, given high returns for ILS: Thad Hall, Augment Risk was published by: www.Artemis.bm
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2024 was another record issuance year for the catastrophe bond market and with total alternative reinsurance capital reaching new heights, the way insurance-linked securities (ILS) managers and investors matched appropriate risk returns was a notable success, according to Bill Dubinsky, Managing Director and CEO of Gallagher Securities.

We spoke with Dubinsky, who heads up the capital markets and ILS arm of reinsurance broker Gallagher Re, around the launch of the firm’s January 1st renewal report, to gauge his thoughts on the performance of the ILS market in 2024 and what 2025 might hold for the space.

For the catastrophe bond market, Dubinsky noted a “relatively busy year-end” more or less in line with expectations.

“Whereas last year, Q4 was very much an outsized number, this year, Q2 was very much the outsized number. And we’ve ended the year slightly above last year’s issuance with another record year,” said Dubinsky.

Artemis’ end of year cat bond and related ILS data, which is tracked slightly differently to how Gallagher Securities does it, but directionally ends up being the same, puts Q2 2024 issuance at $8.4 billion, the biggest quarter in the market’s history, and Q4 2024 issuance at $4.5 billion, which while down on Q4 2023’s record $5.6 billion for the quarter, is still a robust end to the year.

Together with a very strong Q1 and muted Q3, total 2024 issuance hit a record $17.7 billion, up on the previous annual record set in 2023 by more than 7%, according to Artemis’ data.

“We’re all expecting that the issuance level will continue to increase at a macro level, and it’s just there is that unpredictability for both sides to keep it in a good dynamic tension between the protection buyers and the investors, which is really what we saw, with the exception of Q2, for most of the last 12 months,” said Dubinsky. “There was maybe a one month period where things got out of whack, primarily for index triggered deals, but mostly it was relatively predictable, which is what we need.”

Looking ahead to 2025, Dubinsky told Artemis that, in terms of challenges, 2025 will likely be similar to what the market saw in the second quarter of 2024.

“As the market has grown and investors have more money to put to work, which they certainly do, there is a timing question of matching up the deals coming to market and the available cash and trying to make it relatively predictable where execution will be. I think that is the major challenge, really, for the first half of the year and certainly for Q2,” said Dubinsky.

In terms of demand for ILS products and strategies in 2025, Dubinsky expects healthy and robust demand for the cat bond product to persist but noted that it’s been somewhat of a down few years for the illiquid ILS space.

“Investors have had trouble raising money for illiquid ILS type strategies. Holding aside sidecars and things like that, but for excess of loss, that’s been challenging, and things are starting to turn,” he said.

“So, I think, over time, we do anticipate that there could be more opportunities for investors to raise money and put it to work in illiquid / collateralized re strategies. But whether that’ll be in H1 2025, or whether it’s a little further down the line, I don’t think we have a precise crystal ball there,” added Dubinsky.

Of course, and as noted by Dubinsky, appetite for private ILS strategies in part depends on the returns available in the cat bond space.

“So long as the returns are healthy in the cat bond space, there’s less of an incentive for end investors, such as pension funds, to allocate to illiquid ILS strategies. But we’ve certainly seen a downward trend in spreads throughout 2024 and that will likely continue to some extent in 2025. So, it’s just that there’ll be an inflection point at some point, but we don’t know exactly when,” said Dubinsky.

The ILS investor base continues to expand and is now very sophisticated and increasingly knowledgeable of the sector, and Dubinsky expects the approach of investors in 2024 to be replicated in 2025.

“I thought what was particularly successful in 2024 was the way that the ILS managers and those investors who invest directly really found the risks that were the best fit for them, and the strategies and shared information,” explained Dubinsky.

He went on to describe cyber as a perfect example, as it’s not for everyone.

“There are certain investors and pension funds that said cyber risk is not for them just yet and others have really taken to it. And so, I think it’s really tailoring the strategies, tailoring the solutions, connecting the right risks that we as a broker have access to, to the right types of investors.

“So, there’s not a, I would say, homogenous approach, it’s more of this matching of appropriate risk returns, and that’s something that is extremely necessary to grow the market,” he said.

“Besides cyber, I’ll give you a couple other examples, which is, you can look at aggregate covers, and in general, many of the investors are still quite reluctant to support aggregate covers in the cat bond market or in illiquid ILS strategies, in either case. This is because of the performance that they had during the, let’s call it the past five to seven years. But a number of the investors have looked at that and said, you know what, it does make sense if it’s the right cedent and if it’s the right structure. And so, for those investors, it’s a growth area, but for the others, it’s still something where they are staying away for now.

“And so, we’re really seeing the growth of a slightly more fragmented market. And that is, I think, a good thing to satisfy all the diverse needs that are out there from cedents and from end investors,” concluded Dubinsky.

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

ILS manager & investor success at matching risk returns vital for market growth: Dubinsky, Gallagher Securities was published by: www.Artemis.bm
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