From parametric to ILS, how capital strategy is shifting in LatAm amid volatility

Lee Ellis, of Augment Risk, explains why Latin American cedants are shifting focus to how different forms of capital work together to manage significant cat exposure and aggregation risk.

Key points:
Capital mix shifts to manage aggregation
Parametric and ILS move centre-stage
Cedants seek predictability, not just cover

Across Latin America and the Caribbean, discussions are increasingly focused on how different forms of capital – from structured reinsurance and parametric solutions to insurance-linked securities (ILS) – can work alongside traditional reinsurance to manage aggregation and second-event risk better. That shift is also shaping discussions at Miami Reinsurance Week and influencing how strategies are being set for the year ahead.

For Lee Ellis, managing partner, capital solutions at Augment Risk, the change reflects a market that has become more disciplined about capital deployment.

“One of the strongest themes we identify from regional clients across Latin America and the Caribbean is the need for greater resilience and responsiveness in an uncertain environment,” Ellis told Miami Reinsurance Week Today. “Recent loss activity has reinforced the value of solutions that respond quickly and predictably.”

Miami has long been associated with Latin America and the Caribbean, but Ellis said its role has broadened as global capital has taken a closer interest in the region. 

“Miami itself has become a global hub, attracting greater interest from global reinsurers and capital providers,” he said. “It is now an essential market in the global reinsurance ecosystem.”

For Augment Risk, the value of the week lies less in execution and more in perspective. “It is an opportunity to speak with our partners and link regional need with global appetite,” Ellis said. “It enables us to engage early in the year with a wide range of stakeholders on how risk is evolving regionally and ensure the capital solutions we create are aligned to reality.”

Rather than viewing different forms of capital as alternatives, Ellis said clients are increasingly focused on how they can be used together. 

“Need for greater resilience and responsiveness in an uncertain environment (are) strongest themes across Latin America and the Caribbean.”

“Discussions are increasingly focused on how different forms of capital, such as structured reinsurance, parametric and ILS, can interplay with traditional reinsurance to better manage aggregation and second-event risk,” he said.

That thinking reflects the operating environment many buyers face. Volatility remains a defining feature across LatAm and the Caribbean, driven by catastrophe exposure and broader economic uncertainty. In response, interest in more adaptable approaches to risk transfer is building.

Ellis said this includes “increased use of parametric solutions, structured reinsurance and ILS capacity”, with early momentum around more domestically anchored ILS structures. The focus, he stressed, is not on innovation for its own sake. 

“Our focus is on how these tools can be combined alongside traditional reinsurance to deliver speed, certainty and capital efficiency,” he said.

Ultimately, he added, what matters to clients is how those structures perform financially, “such as preserving covenant headroom, smoothing earnings volatility and protecting enterprise value”.

Miami’s value, Ellis said, lies in the quality of dialogue it enables, to be able to have joined-up conversations with regional clients, global reinsurers and capital markets participants in one place. “We use that time to listen and understand how recent events are influencing client priorities and how appetite is evolving across different sources of capital,” he said.

Those insights feed directly into Augment Risk’s advisory work, ensuring the capital solutions designed are informed by real regional experience and supported by capital aligned with clients’ longer-term objectives.

That approach reflects how the firm positions itself. “This very much aligns with our guiding principle of being a differentiated intermediary, designing capital solutions rather than competing on transactional metrics,” he added.

As markets adjust, Ellis said clients are increasingly explicit about what they want from their risk strategies.

“Clients are telling us very clearly they want certainty not just of coverage, but of financial outcomes,” he said. “They want to understand how their risk strategy supports earnings stability, capital efficiency and, ultimately, valuation.”

While alternative capital and new structures continue to attract interest, reliability under stress remains the key test. Clients, Ellis said, are focused on “how quickly it responds, how reliable it is under stress and how it performs across cycles”.

Looking ahead, Augment Risk is using Miami Reinsurance Week to deepen discussions around how those expectations translate into programme design – from structuring solutions that reduce balance sheet volatility to understanding how different sources of capital behave under real loss scenarios and how programmes can be built to remain effective across cycles, rather than just at renewal.

Lee Ellis is managing partner, capital solutions at Augment Risk. He can be contacted at: Lee.Ellis@augmentrisk.com.

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