The $90 billion insurance-linked securities (ILS) sector is undergoing a sea change, led by investors with significant experience in the industry and a heightened awareness of the need to marry their desire for non-correlated risk and attractive returns with the growing demand for responsible investment.

Executive Summary

The $90 billion insurance-linked securities sector is being led by a new breed of ILS investors who are looking beyond cat risk for high-frequency, low-severity investment opportunities and are increasingly guided by a commitment to ESG precepts, according to Matthew Charleson of Strategic Risk Solutions, who also says this generation of investors is increasingly engaged with InsurTech.

For most of the last 20 years, traditional ILS investors have been hedge funds, pension funds and other institutional investors. They look to the insurance and reinsurance sector for portfolio diversification as an alternative, non-correlating asset class that produces historically strong returns.

The more traditional appetite for ILS had been high-severity, low-frequency events with a short duration. Natural catastrophe perils, which until 2017 made consistently positive returns (for the most part), were a compelling investment target.

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