New economy risks are growing faster than traditional capacity: Augment’s Cripps

Increasingly interconnected risks are changing what clients need from brokers, while opening new opportunities for parametric and ILS capital, according to Augment Risk growth leader.

Key points:
Risk outpaces traditional capacity
Data centres open a new frontier
New-economy risk is growing faster

“The market needs to stop organising itself around lines of business and start organising around the client’s actual risk and capital requirements.”

That is the message from Kurt Cripps, Augment Risk’s newly appointed group head of growth and broking, who argues that increasingly interconnected risks require brokers to look beyond traditional product boundaries.

It is also, he says, the premise on which Augment was built in 2023, with parametric and insurance-linked securities (ILS) treated as core disciplines rather than additions to a traditional broking model.

“Risk today is cross-class and cross-capital, and clients require a broker built the same way,” Cripps told Monte Carlo Today. “That’s not a slogan for us. It’s the operating model.”

His comments come shortly after his promotion to the newly created group-wide role, which expands his remit beyond the parametric business he has led since joining Augment in October 2023. 

For Cripps, the shift is becoming visible in the way clients approach parametric risk.

“Two or three years ago, most conversations still started with ‘does this actually work?’ Now clients come in asking how fast we can structure something and how quickly it pays.”

“New economy risk is growing faster than traditional re/insurance capacity can keep pace with.”

From acceptance to scale

The question for parametric insurance, he argues, has moved from acceptance to execution.

Its reach is widening beyond climate and natural catastrophe into agriculture, supply chain, cyber, space and public-sector resilience. The core attractions remain trigger certainty and speed of payout, but the obstacles to further growth have changed.

“The talking points now are distribution, data quality and client education, because those are the actual bottlenecks to scale,” Cripps said.

“Basis risk hasn’t disappeared, but the market is far more sophisticated about managing it than it was even eighteen months ago.”

The next phase could increasingly involve risks where conventional insurance capacity is struggling to keep pace with investment and exposure growth.

Data centres are a case in point. Cripps believes the pace of construction driven by AI and cloud computing is outstripping the ability of traditional property and business interruption markets to absorb the associated risks.

“That gap is the opportunity”

Grid instability, power outages, cooling failures, weather-driven downtime and construction delays can all potentially be measured in near real time, creating scope for parametric structures.

But Cripps argues the bigger opportunity is to use those structures to attract investors that might not otherwise take the exposure.

“The real opportunity isn’t just writing more of the same risk faster; it’s using parametric structures to bring capital into the space that wouldn’t otherwise engage with data centre risk through a traditional indemnity form at all.”

A new pool of risk for ILS?

Whether data centres can become a meaningful asset class for ILS investors is less certain. “I think it can, but it isn’t there yet,” Cripps said.

The hurdle is scale and standardisation. Most transactions remain bespoke, which can demonstrate that a structure works but makes it difficult for institutional investors to build diversified portfolios.

What is needed, he said, are “consistent, well-defined triggers and enough portfolio aggregation that investors can underwrite a curve rather than a one-off”.

“Standardised data, a track record of clean payouts and enough transaction volume to build confidence. That’s the path to scale.”

The search for such risks is becoming more pressing as capital in the ILS market looks beyond its traditional concentration in natural catastrophe.

Cripps sees digital infrastructure and energy as two of the clearest opportunities, where insurance capacity remains scarce and investors can potentially find risks with attractive diversification characteristics.

“New-economy risk – data centres, energy transition assets – is growing faster than traditional insurance and reinsurance capacity can keep pace with,” he said.

That imbalance is attracting capital willing to take on complexity that much of the conventional market is not yet equipped to underwrite.

Building the bridge

Capital looking for diversification and clients looking for capacity do not, however, automatically create a market.

Cripps says structuring is what connects them. “Investors and cedants can both want a trade and still not get there without someone translating the risk into a form each side can actually underwrite — defined triggers, quantifiable data, the right layering and tranching.”

That becomes more important as investors venture into risks with less established structures and loss histories. Parametric solutions can provide some of the certainty they are looking for, particularly by removing lengthy loss-adjustment periods and reducing reserving uncertainty.

“That translation function is what structuring does, and it’s exactly why brokers who can move fluently between the insurance side and the capital markets side matter more now than they used to,” he said.

“Without that structuring layer, capital and risk simply don’t meet, even when the appetite is there on both sides.”

Kurt Cripps is the group head of growth and broking at Augment Risk. He can be contacted at: kurt.Cripps@augmentrisk.com

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