The $90 billion insurance-linked securities (ILS) sector is undergoing a sea change, led by investors with significant experience in the industry and a heightened awareness of the need to marry their desire for non-correlated risk and attractive returns with the growing demand for responsible investment.
For most of the last 20 years, traditional ILS investors have been hedge funds, pension funds and other institutional investors. They look to the insurance and reinsurance sector for portfolio diversification as an alternative, non-correlating asset class that produces historically strong returns.
The more traditional appetite for ILS had been high-severity, low-frequency events with a short duration. Natural catastrophe perils, which until 2017 made consistently positive returns (for the most part), were a compelling investment target.
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