As technologies evolve and the ILS sector continues on a rapidly expanding road, Dmitry Mnushkin, president of Treefrog Consulting, explains that current market leaders must seek a swift transition to the next generation of products or risk being made irrelevant by new entrants.
The insurance-linked securities (ILS) space has attracted a lot of attention in the past few years. It has seen large influxes of capital, the entrance of a number of niche players and the increasing recognition by traditional reinsurers that they need to join the party or continue to see their market share erode.
Early ILS entrants have established a firm foothold, but those just starting now face a competitive landscape of new and established balance sheets vying for capital investment dollars and attractively priced risk. Success for startups now, as always, is driven by their ability to come to market at the right time with products investors want.
Meanwhile the flood of new capital, combined with several years of relatively benign catastrophe losses, is having a negative impact on pricing as reinsurance rates continue their steady downward march. Many traditional reinsurers have yet to commit fully to their own ILS strategies for fear of cannibalising their existing books of business, but few in the industry expect this reticence to last.
ILS, Intelligent Insurer, Dmitry Mnushkin, Treefrog Consulting