Multiple challenges present a landscape in flux for ILS: Twelve Capital

Reinsurance results have been very good. But the industry is also having to grapple with many challenges including conflicts, an unstable geopolitical environment and economic uncertainties, Christoph Bürer, a co-founder of Twelve Capital, told Monte Carlo Today.

“This presents a complex backdrop for the reinsurance industry,” he said. He noted that losses in many areas remain elevated largely driven by secondary perils and climate change impact. Yet the industry has managed to perform well.

“Reinsurance results have been very good, with underwriting profit and insurers earning their cost of capital, which hasn’t been common in the past,” he said. 

Bürer emphasised that discipline was crucial as the volatile market evolved. “Our positioning is very much skills-based. It’s fundamental analysis: fully understanding the underlying insurance risks, as well as balance sheets, accounting rules and the regulatory environment,” he said.

“We seem to be in a very good spot, but there remains the question of how to maintain discipline going forward, and that will be part of the debate in Monte Carlo this year.”

Applying this complexity to the shifting landscape of alternative capital, he described it as “a landscape in flux but filled with potential”.

Twelve Capital is well-positioned to cope with such an environment, said Bürer. He stresses the firm’s independence and investor-focused approach, saying: “We represent investors, and as an investment management firm, we are completely independent, serving investor interests.” 

“We’ve been explicitly pushing the peak peril components.”

That means Twelve Capital is able to concentrate solely on delivering returns to its investors, avoiding conflicts of interest that might arise from being part of a larger insurance or asset management firm.

“We are in this market as an insurance-linked securities (ILS) manager; we deploy capital on behalf of investors in the space, in terms of ILS but also more broadly in terms of debt and equity, providing this capital to the overall re/insurance markets,” Bürer stated.

He elaborated on the firm’s strategic focus, saying: “We’ve been explicitly pushing the peak peril components.” 

This approach aligns with the original intent of ILS, which is to provide capacity for large, severe events. 

“ILS is now going back to its original purpose: complementing the re/insurance markets and creating capacity for large events,” he said. 

This commitment to peak perils ensures that Twelve Capital is aligned with the core principles of ILS.

Bürer explained the firm’s rigorous investment process. “We place a lot of emphasis on the structures and making sure that what we price for is reflected by the wording.”

Subject to regulatory approvals, Twelve Capital has agreed to a merger with Securitas Investment Partners, which will create a business with almost $8 billion of assets under management. Bürer describes the deal as a strategic move designed to enhance scale and offer investors a broad set of products and solutions and maintain independence in a competitive market.”

He addressed the impact of climate and natural catastrophes on the industry, saying: “We use data analytics, traditional tools, and artificial intelligence to understand climate change trends.

“It’s crucial to understand the short-term variability and the long-term effects of climate change in order to determine the implications for reinsurance capital requirements and pricing,” he concluded. 

For more news from the Rendez-Vous de Septembre (RVS) Click here.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.