ILS investors pausing for thought, says Artex boss

Investors are “pausing for thought” after two difficult years in the ILS market have taught them they can sustain large losses in this market, according to Peter Mullen, CEO at Artex, speaking at the Cayman Captive Forum.

Many investors are looking to recalibrate their models, Mullen said, especially with regards to wildfires, where the extent of the losses in recent years has taken many by surprise. “Investors were not banking on those types of losses,” he said.

“This is a business where you can actually watch your investors melt away on TV, it is intense,” he added.
Mullen said insurance is fundamentally different to many other businesses because products are sold before their price is really known.

However, although rates have increased in recent years, it is wrong to describe the current environment as a hard market, said Mullen. “Increasing interest rates have backed carriers into a corner and they have no option other than to raise rates. But there are so many carriers now that it mitigates the level of those rate increases,” he said.

Mullen advised insurers to invest as much as they can into technology to remain competitive. Captives should also conduct analytics on their positions six months before renewals, to give them them an advantage when negotiating rates, he said.

Any captives thinking about buying cyber coverage should do so, he added. “Cyber is not expensive at the moment, but it will get more expensive, there are a lot of unknown unknowns with cyber,” he warned.