Trigger words: A column about parametric insurance by Mark Groenheide

Introducing hybrid ILWs

For a long time, industry loss warranties (ILWs) occupied a very specific corner of the reinsurance market. They were practical instruments; simple by design and built to transfer tail risk efficiently rather than tell a story or solve for precision.

What became clear around the January 1 renewal is this definition no longer fits reality.

ILWs are no longer a single product category. They are increasingly a framework from which multiple forms of risk transfer are being engineered. The name remains familiar, but the way these structures are being constructed, priced and deployed has significantly changed.

From our vantage point, the most compelling innovation is happening at the intersection of ILWs, parametric design principles and disciplined underwriting. That point is producing risk transfer solutions that simply did not exist a decade ago.

We’ve entered a world of hybrid ILWs, which share the characteristics of parametric insurance with those of more traditional ILWs.

At January 1, we saw far greater diversity in how triggers were defined and applied. Loss indices, reporting methodologies, aggregation mechanics, geographic scope and payout timing were all being scrutinised and refined. Buyers were not just asking whether protection would respond, but how it would behave under pressure and how quickly certainty could be achieved.

Capital, for its part, is still active, but it is more intentional. Capacity is gravitating toward structures that offer clarity, transparency and predictable outcomes. Many of these transactions now borrow heavily from parametric logic while remaining firmly within an indemnity reinsurance framework.

The result is an evolution rather than a replacement.

ILWs are increasingly being structured as components within broader programmes. They are layered, customised, blended and integrated alongside traditional treaties and other alternative solutions. In many cases, the end product looks very little like the standardised ILWs of the past.

January 1 highlighted something important. The market is not moving away from ILWs; it is redefining what they are capable of doing.

For reinsures, sponsors and sophisticated risk buyers, this matters. These structures are no longer purely tactical hedges. They are becoming strategic tools that influence capital efficiency, earnings stability and long-term risk management decisions.

January 1 was not just another renewal cycle. It was confirmation that the ILW market has entered a new phase, even if we have not yet fully updated the vocabulary we use to describe it.

Mark Groenheide is the founder, CEO and president of LIRG.

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