There is major scope for AIG to build products for the insurance linked security (ILS) market, AIG’s president and chief executive officer Brian Duperreault has said.
Speaking today at a PwC breakfast briefing in Monte Carlo, Duperreault said he believes the ILS market will continue to prosper and wants AIG to be part of its evolution.
“I think there’s a lot of runway in the ILS market,” Duperreault said.
While the ILS market has historically focused on natural catastrophe, Duperreault said it was evolving to encompass other risks.
“To date its fundamentally been used in big bangs – its parametric triggers, there’s an event, it’s clear cut and there is a reloading,” Duperreault said.
“It hasn’t as yet been adapted to longer term business – we’ll see how that develops,” he added.
“There’s a lot of potential – it still remains to be seen – I’d like to be able to do that experiment but I think there’s a lot more we can do with this technique.”
Duperreault said that - as the ILS market becomes more sophisticated - he expected AIG to become more of an active player in the market.
“I can see a time when we’re developing products directly for the ILS market,” he said.
AIG’s takeover in January of Validus gave the US carrier access to AlphaCat – its ILS fund manager.
The ILS market has witnessed a number of developments over the past 12 months.
At the end of August, Markel moved to become the largest ILS fund manager by agreeing to buy Nephila, which has over $12bn in assets under management.
Twinned with its existing ILS vehicle CatCo, the deal will bring the total assets controlled by Markel to $19bn – with the Richmond, Virginia-headquartered firm controlling around a fifth of the global ILS space.
In the UK, new legislation since 28 November 2017 has provided a tax-friendly approach for
on-shore risk transactions that are structured through an ILS framework.
The first transaction under the new regime incepted at 1.1 was a $72mn quota share by Lloyd’s syndicate Neon.