Expanding into non-ILS capital pools is a priority: MS Amlin
November 4 2024 by InsuranceAsia News
While Asia experienced strong pricing corrections in 2023, this trend has dampened in 2024 with the increased rates having attracted more capacity to the region from both London and Bermuda markets, William Ho, MS Amlin Asia Pacific CEO, told InsuranceAsia News.
However, “going forward, we are likely to see this capacity reduce where the business is seen as less attractive,” Ho explained.
MS Amlin’s key focus for 2025 is to expand their Phoenix reinsurance sidecar series. The carrier is planning to grow its investor base by attracting both established insurance-linked securities (ILS) investors and new entrants, particularly from Asia Pacific.
“Expanding into non-ILS capital pools is a priority, as we believe there is significant untapped interest in the Asia-focused risk opportunities Phoenix offers,” Ho said.
In its fourth year, MS Amlin has raised over US$160 million and delivered average returns of 8-9% to investors.
Over four years, the carrier has ceded over US$30 million of premiums with less than US$1 million of claims.
“As we increase Phoenix’s size, we aim to broaden the scope of risks and regions included in the portfolio. This will give cedents greater access to Phoenix capital while enhancing their risk diversification options. We will do this while maintaining profitability for our investors,” Ho said.
“We are experts in the Asia region and are focused on carefully selecting, underwriting and building a portfolio – not just transacting risk and passing it through. Ultimately, we want to help investors be first movers in the region, and develop the ILS market in Asia, for Asia,” he added.
Discussing the outlook for 2025 renewals, Ho observed a sustained recovery in available capacity and the retro markets.
“There is more capacity available in the market as capital flows back into the reinsurance sector for 2024. However, without disciplined underwriting and positive results, that capital could easily retract again,” he cautioned.
Ho also noted that capacity falls into two categories: long-term committed capacity and short-term opportunistic capacity.
“Cedents need to make a conscious decision over the capacity they choose and ensure it aligns with their longer-term development plans,” he advised.
“It would be quite risky to be overly reliant on the more short-term opportunistic capacity,” he said.
“There is more capacity available in the market as capital flows back into the reinsurance sector for 2024. However, without disciplined underwriting and positive results, that capital could easily retract again.” William Ho, MS Amlin
In terms of major cat losses of 2024, Ho highlighted strong typhoons in Taiwan, Vietnam, and China, the Taiwan Hualien earthquake, the most significant loss event to impact the market in ten years, and the Dubai floods, the worst insured loss to impact the MENA region up to date, as significant regional cat events.
“Globally, we have recently seen insured losses exceed US$100 billion for yet another year. As this becomes the norm, we need to ensure retention and pricing adequacy remains across our portfolio to maintain a sustainable product for our clients,” he emphasised.
Whilst there is speculation about potential pressure on reinsurance rates, underwriting discipline will likely remain for the majority of the market with most markets still being bottom-line driven, Ho said, explaining the potential impact of market softening on underwriting discipline, retentions, and terms and conditions.
“In an environment where insured losses consistently exceed US$100bn globally, it would be questionable why a reinsurer would want to lower retentions or provide more frequency loss-driven covers. We personally are not in a position to accommodate such actions,” Ho said.
Regarding the use of structured solutions and alternative risk transfer mechanisms, Ho reminded about the importance of innovation regardless of market conditions: “We are always trying to be innovative for our clients and brokers to ensure we present the most suitable products that are viable and sustainable for both buyers and sellers. Market conditions may influence available capacity, but they should not dictate reinsurers’ levels of innovation.”
As MS Amlin progresses and develops in the Asia region and market, “it is paramount we remain attuned to current climate and trends, ensuring our product offering meets clients’ and brokers’ needs while maintaining the technical expertise required to operate a sustainable business”, Ho said.
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