Speaking on a panel debate hosted by The Insurer TV at the Monte Carlo Rendez-Vous as part of its Casino Square Sessions, Schultz said cyber is likely to attract a different set of institutional investors than previous ILS transactions.

“We think we’re close,” he said. “We think there’s probably 12 to 15 [institutional investors] that will look at cyber. I know we’ve said this for a while, but we think we’re close to getting cyber launched into the ILS marketplace.

“On the long-tail or other perils, there are other types of investors that value longer duration liability, because they like the longer duration assets under it,” he said.

However, Tony Rettino, founding partner and senior portfolio manager at Elementum Advisors, said there remain concerns around longer-tail risks and in particular, cyber.

“Cyber is clearly a big enough market, and it’s capacity constrained, so there should be solutions. But our concerns are that we’re not sure that the risk has yet stabilised, and we’re not sure that the risk has been defined well enough,” he said.

Rettino said with cyber risks changing fast and models still embryonic, he thought it would take a large loss or two for the market to redefine contract terms and get a firm grip on the risks involved. However, he noted that others may be keener to grab an opportunity first.

Tony Rettino, founding partner and senior portfolio manager, Elementum Advisors

“We think cyber risk is evolving faster than the market can capture it right now,” he added.

While discussing appetite for longer-tail risks more broadly, Eveline Takken-Somers, senior investment manager at pension fund manager PGGM, said that most pension funds are not looking to add additional ILS allocations.

“From my perspective, some investors are, and some are not. Our board is not and they are very clear about that,” she said.

“It’s relatively complex compared to other asset classes in which pension funds invest. That increase in complexity is definitely not what they were looking for,” Takken-Somers said.

“Also, [the board] questions how sustainably we could run through those other business lines, and they always care about a fair, fair cost,” she added. “So I think those were concerns that we could not address right now. In addition, given the fact that we’re a pretty large pension fund, we need big lines, or a sizeable enough asset class in order to make it attractive, otherwise, we spend a lot of time on something that’s kind of relatively small.”


Cat bond momentum

The panel was bullish about broader ILS growth following a strong year for cat bonds.

In its latest catastrophe bond market report, Aon reported that cat bond issuance reached near-record issuance levels of $12bn from 1 July last year to 30 June this year. The record level of $13bn was reached in the prior year.

Catastrophe bond issuance by year, 2010 to 2022 (years ending 30 June)

“It’s very possible we’ll set new records this year. If not, it will be comparable to last year,” Schultz said. “We anticipate a very busy remainder of 2022.

“We’re going to see greater demand from cedants looking to transfer risk into the cat bond market. We anticipate elevated issuance going into the end of the year compared to normal levels, and we expect that to continue in 2023,” he said.

“We think capacity will be there. If not then we’re going to see a supply-demand imbalance, which will lead to more uncertainty in the market, but from where we sit today we’re optimistic,” he said.


However, PGGM’s Takken-Somers raised doubts there would be enough capacity deployed by investors to meet buyer demand, with the picture more mixed for collateralised reinsurance and retro business.

Schultz responded: “We feel like the cat bond component of the three is going to grow on a relative basis faster than the other two. And we think collateralised reinsurance is actually going to shrink, with collateralised retro more or less stable,” Schultz said.

Watch the full ILS debate on The Insurer TV, recorded from our pop-up studio at Monte Carlo’s iconic Hôtel de Paris. Hear from Aon’s Paul Schultz, Elementum’s Tony Rettino and PGGM’s Eveline Takken-Somers on:

  • The current state of the ILS market
  • Supply/demand dynamics
  • Cat bond issuance setting new records
  • Investor interest in long-tail lines, including cyber
  • The inflationary threat to claims severity