Selling the benefits of diversity

28-02-2019

Selling the benefits of diversity

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Potential buyers need to be persuaded about the benefits of diversity, says Clive O’Connell, partner, head of insurance and reinsurance at McCarthy Denning.

Insurance-linked securities (ILS) need diversity. Investors must have different and non-correlated risks in order to ensure that a hurricane season, such as that experienced in 2017, does not have an impact on all their investments.

Diversification by class is a goal that many ILS professionals are exploring, but diversification through geography is already available. The only issue is persuading potential buyers of its benefits.

The solvency protection that ILS provides to insurers is already apparent to those insurers and their regulators. Outside the US, however, a considerable volume of insurance is focused in western Europe, an area which is, fortunately, not overly susceptible to natural disasters.


Diversity, Clive O'Connell, McCarthy Denning, ILS, bonds, data

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