The growth of the Casualty ILS market can be a multiplier of the property cat: Fleming – Artemis.bm

Fleming Insurance Holdings and Altamont Capital Partners hope that cedants will embrace their flexible, flexible Planned Loss Portfolio Transfer (LPT) approach as they look to capitalize on the huge opportunity that is the insurance-linked insurance (ILS) market.

In early August, Fleming, which is expected to have assets and casualties expected to provide financial solutions, added Samir Khare to its list to lead the construction of its ILS platform.

The company, which is owned by Fleming Re and is backed by private equity firm Fleming Corp., which has a majority investment from Altamont Capital Partners, believes the market for ILS collateral is huge.

With this in mind, Artemis spoke with Khare, Director of Casualty ILS Solutions, as well as Fleming’s Chief Executive Officer (CEO), Eric Haller and Joe Zuk, Operating Partner at Altamont Capital Partners, about the company’s strategy.

“When we started Fleming, we wanted to change the mindset of legacy donors,” Haller said. “In addition to other methods, we wanted to create a solution to the problems that arise from accidents in capital markets. The solution is our Planned LPT Solution. Fortunately, this solution is flexible and can be used again and again to do things that have happened repeatedly.”

“Altamont shared the same vision as Fleming regarding the evolution of the commercial and ILS markets. We are excited to be at the forefront of this evolution and help Fleming continue to grow,” added Zuk.

Initially, Fleming’s risk of pushing the ILS will focus on the low risk reserves in retrospect, and Planned LPT drugs to be used with ILS casualties as a way to shorten the tail.

“I would expect the cedants to get these answers,” Haller said. “On top of the benefits of doing things in advance, the Planned LPT Solution will also improve operational efficiency, reduce time and costs associated with one-off operations and provide a tool to improve cost management.”

From the investor’s point of view, Khare explained that the initial reception has been good, although the negotiations are still in the early stages.

“Our plan is to build a platform focused on risk management and risk-adjusted returns. We will also be co-investing with investors to ensure that the interests of all parties are aligned. We expect to be able to use more third-party funds over time,” said Khare.

Although casualty insurance generally has less correlation with capital markets and less volatility than property casualty, capital markets have been reluctant to embrace casualty loans due to the long nature of the business. But this is where the company’s Planned LPT solution comes into play, because “it helps to make these risks easier to find by shortening the time, and the flexibility to give money to investors at different times by removing the tail,” said Khare.

“This is a great shareholder value that should be very attractive to investors,” he added.

In addition to this, Haller explained that as the company’s ILS will include its Planned LPT products, which will define future prices, this will enable greater flexibility to deal with tail risk.

Regarding the lock-up period, Khare told Artemis that Fleming is considering holding the investment for three to four years, although the flexibility of the structure allows for early redemptions due to unforeseen events. He also said that, at the moment, structures like the bag and sidecar are being considered.

Despite the use of capital market capital, Haller confirmed that he does not expect that this will allow Fleming to work with cheap money, but he foresees that the hurdles of return will be proportional to the amount of risk. be equal to the returns that are originally purchased by listing risks on its pages.

“However, the design of an ILS casualty can allow for a more efficient and comprehensive approach to the carrier, especially with the opportunity to expand on existing relationships,” Haller said.

So, how much of an opportunity is the ILS market injured? According to Khare, “Great!”

“An alternative way to get property cat insurance is $100 billion. Globally, the escape market is expected to be worth more than $800 billion, and the business is expected to increase over time due to the complexity and risk premiums.”

“Casualty ILS is still in its infancy, and with solutions like Fleming’s, which help to overcome the tail by providing ways to generate income earlier than previously allowed, the casualty ILS market has the potential to multiply the market of cats. time,” said Khare.

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