Building bridges: ILS investors are ready for more

ANT’s new insurance and ILS cells see opportunity in upheaval. Jonathan Beck, the launch’s founder and CEO, explains the ethos behind the new platform.

Early in June, AXA XL’s Jonathan Beck and Richard Spurrier announced the launch of a new business, ANT, with two cells: ANT Exceptional Risks, a specialty insurance cell; and ANT Insure, a special purpose insurance-linked securities (ILS) vehicle.

According to Beck, the chief executive officer and chief underwriting officer for ANT (Spurrier acts as chief operating officer), the pair have been “blown away” by support since the launch.

Beck spoke about how the business came about and his plans with the Re/insurance Lounge, Intelligent Insurer’s online, on-demand platform for interviews and panel discussions with leaders in the industry.

A time and a place
Beck was a financier for startups in insurance and wealth management for almost six years prior to launching ANT. Before that he was the country head of AXA XL in Guernsey, and according to him it was the obvious choice of location for the new business.

“We could have set this up anywhere, but Guernsey has the best infrastructure to support a venture like this.

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“It has the insurance managers, the legal service providers, accountants, tax advisers, fund managers, corporate service providers—innovation runs deep within Guernsey, and it continues to be a pioneer due in its legislative and regulatory environment,” Beck explained.

Added to that, it was an early adopter of the OECD’s Common Reporting Standard to tackle tax evasion and has been whitelisted by the EU.
“Add all of those things up, and it’s a really strong case for Guernsey.”

The two cells share a listing in Guernsey, but they are quite different: ANT Exceptional Risks, which is awaiting regulatory consent, will write kidnap and ransom, marine piracy, fine art and specie risks, at least initially through traditional brokers. It’s a class of business Beck has been involved with for 20 years.

ANT Insure is perhaps the more interesting: it’s a special-purpose ILS vehicle that will target “correctly price-adjusted contingency risks”, mainly focusing on sports contractual bonus, prize indemnity and loss of revenue risks.

Rather than being backed by traditional reinsurance it will be using the alternative capital markets to support each deal on a fully-funded basis. It aims to “build bridges” to connect such risks with alternative capital, said Beck.

There is a commonality that unites the cells: a sense that there is an opportunity to get in early. The time is right for disruption, Beck argued.
“I quite like disruption, and whenever there’s a change within the marketplace, it creates the ideal ceding ground for it,” he said.

Fresh eyes
The market, he said, “is hardening rather than hard”, and for ANT Specialty Risks, there’s a clear opportunity, he argued.

“Traditionally, this has been a very profitable class, but there’s certainly a feeling that the pain of some of the systemic cyber losses is really starting to bite.

“It’s also a class business with high-cost entry points, with the need to retain consultants, to negotiate kidnaps or extortions, and acquisition costs that are very high,” he explained.

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“When you add those to the mix, along with operational costs, loss reserves and reinsurance costs, it’s an ever-increasing mountain of expense.”

Combined with losses from the COVID-19 pandemic and some poor risk selection, that will lead some traditional insurers to exit the area, Beck predicted, but as a new entity there are opportunities for ANT to capitalise on.

“We’re able to look at this with a fresh set of eyes, with no systemic cyber, no COVID-19 losses and a very clean balance sheet,” he explained. “When looking at reinsurers we wish to partner with, we can give them access to this specialty niche market but in a far more manageable manner, without having to commit the same level of capital.”

The ILS market also offers opportunities for new entrants. While there’s significant alternative capital in property cat risk, the specialty niche markets have yet to see the same. That’s now ripe for change, Beck thinks.

“The market is evolving, and it’s exciting to be at the beginning,” he said.

He referred to recent comments by Stephan Ruoff, global head of ILS at Schroders Capital, that the risk universe is always growing, along with a need to build bridges between risk and capital.

“We couldn’t agree more,” said Beck.

“There’s been a natural falling-off of available traditional paper backed by reinsurance for these contingency classes,” he added.

“Within the alternative capital market, we can provide the line size required by brokers and clients alike, which are simply unobtainable through the Lloyd’s Market at the moment. It’s that convergence of capital that is so important.”

There’s work to do for fund managers and others to understand the risks fully, he concedes, but he insisted there are significant opportunities for first movers.

“It’s going to take a while, but I think we are coming in at the right time.”

To view the full Re/insurance Lounge session click here.