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Willis Re L/H Managing Director: ILS Making Inroads Into Life and Health Markets

SINGAPORE, Nov 14, 2017, (A. M. Best via COMTEX) --

Greg Solomon, managing director, life and health, Willis Re, said insurance-linked securities gained favor in property/casualty markets, but are beginning to attract investors comfortable with longer durations. Solomon spoke with A.M. BestTV at the 14th Singapore International Reinsurance Conference.

View the video version of this interview at: http://www.ambest.com/v.asp?v=solomon1117

Following is an edited transcript of the interview.

Q: Let’s start in North America. The recent Harvey and Irma hurricanes resulted in billions of dollars of losses. Of course we’re fortunate that the number of people who died wasn’t higher. How are life insurance companies in Asia now looking at the possible impact of catastrophes on them?

A: Any loss of life is of course very sad but the impact of natural catastrophes for life and health companies is relatively smaller. We’re lucky about that. Back in 2011 in Japan although, again there were huge problems on the P&C side but the loss of life wasn’t as significant. That has resulted in some companies even cutting back on their cat programs because of the impact of nat cat.

We’re seeing similar discussions taking place now. I think what’s happening is companies are less worried about being able to survive large nat cats in the life and health space but what they are starting to worry more about is perhaps terrorism covers.

We’re seeing more terrorism covers. Companies seem to be focusing more on how their P&L (property and liability) is being impacted and less so perhaps on the solvency of cat events. Probably we’ll see more in this space and companies demanding less exclusions around terrorism and NBC because that’s the cover that they need.

Q: We’re also seeing that ILS funds have played a significant role in covering the hurricane losses, for example. How significant is the role of ILS as an alternative to traditional reinsurance on the life and health side?

A: With property and casualty, the short-term nature of the business means that capital available through ILS is well matched, and it’s making up a very important part of the risk capacity available. In life and health business, typically the transactions are longer, multi-year through to whole of life. As a result it’s been harder to find capital. But there are now several ILS funds which specialize in life and health. We’re finding that investors are more comfortable with longer and longer commitments on the capital side.

We’re going to see that growing. We’re going to see an increasing role for ILS funds but we don’t believe it’s going to reach quite as big as it did on the P&C side.

Q: Putting alternative capital to one side for a moment, how do you see competition playing out between the traditional life reinsurance companies?

A: It’s interesting. In life and health reinsurance, we’re seeing something like, according to the A.M. Best report on reinsurance, 90% of the volumes are being written by about seven of the biggest reinsurers. It definitely is a skewed industry but there is more growth taking place in perhaps what you might call the tier-two reinsurers.

There’s growth. They’re setting up more offices around the world. We’re seeing the share of business maybe starting to creep up over the years. Yes, we’re going to see more happening in that space, definitely more competition coming through.

Q: Almost every day we see announcements about another discovery or success in medical science. What impact will this accelerating progress have on the life and health industry?

A: The impact is going to be very significant. There’s so much happening in this space. It’s really hard to keep up. There’s the field of personalized medicine where treatments are now being matched to people’s individual genetics. It’s no longer hit and miss about which chemotherapy drug to use. They’re being very targeted in dealing with cancers and depression and so on. We’re going to see much better treatments taking place.

Putting aside even the advanced stuff like genetics, stem cell therapy and so on, even more basic stuff, just what we’re eating. There’s a lot of research coming out that says that we’ve been doing for the last 50 or 60 years is wrong. People have been pushing us into low-fat diets and panicking about cholesterol. There is so much research coming out now that shows that low-fat diets are bad, that people with low-fat diets and low cholesterol are actually more likely to die.

There’s a lot of stuff coming out where people who have incurable diabetes by changing their diet, simple change in diet, low carbs, high fat, are coming off insulin. That’s great for us, great for society but it is a little bit worrying for holders of longevity risk including pension funds, for example.

View this and other interviews at http://www.ambest.tv

(By Ernesto Calucag, Hong Kong news editor: Ernesto.Calucag@ambest.com)

Ernesto Calucag

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