There will continue to be upward momentum of rates in 2021, with particular volatility in the retrocession space, although how long these conditions last is uncertain, according to Des Potter, Managing Director, Insurance-Linked Securities (ILS) Origination and Structuring at GC Securities*.
“I’m not sure we will see a Class of 2020 in the same way we saw a Class of 2001 and 2005,” said Potter. “There have been a lot of management teams encouraged by ambitious investment bankers that have pursued start-up ventures. But as private equity investors undertake their due diligence of these business plans, the start-up offering has proved to be less compelling than investing in an established platform or perhaps supporting a management buy-in.”
“There is a question about the longevity of the current market conditions and the ability to access good business and deploy capital efficiently,” he continued.
“There have been a couple of ILS funds seeking to gain traction, and they have got some very reputable management teams. But they are facing the same headwinds and need to convince the investor base now is a good time to come into the asset class and to demonstrate that the lessons of the prior years have been learned and the propensity of a surprise loss has been mitigated.”
*Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities LLC, a US registered broker-dealer and member FINRA/NFA/SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Securities or investments, as applicable, are offered in the European Union by GC Securities, a division of MMC Securities (Europe) Ltd. (MMCSEL), which is authorized and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC. MMC Securities LLC, MMC Securities (Europe) Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan Companies. This communication is not intended as an offer to sell or a solicitation of any offer to buy any security, financial instrument, reinsurance or insurance product.