The record losses we saw in 2017 and 2018 were felt heavily by the insurance industry, and there is no denying that two years of losses have affected investor sentiment. While such a statement is hardly surprising, it is notable that we’ve seen a marked difference in attitude between renewals at the end of 2018 versus the prior year. The more cavalier responses to the losses of 2017—which people viewed as a “one-off”—have certainly dampened the appetite of investors, who are now taking a more measured approach.Executive SummaryParesh Thakrar, Commercial Director at Brit, discusses how the 2017 and 2018 loss years have affected investor sentiment in the insurance linked securities space, as well as the questions investors should be asking as they look to identify the right ILS partners.
Within this new reality, it is worth highlighting that the archetypal investor is much broader today and increasingly part of larger asset allocators across many strategies and investments (equities, fixed income and so on). Of course, it is critical to remember that this asset class, by its nature, will see periodic losses.
Investors should view it over a five- or 10-year time horizon. In the short term, investors can see one or two years of losses, but over the longer investment period, they should still see attractive returns. However, two years of consecutive losses inevitably have driven more difficult questions from investment committees. In contrast you have a 10-year bull run in equities—and diversification hasn’t yet paid off.