Africa: primed for new ILS markets
Investors in ILS are seeking innovation - they may find it in Africa where a combination of transnational bodies, better data and a desire to structure improved disaster relief could combine with new ILS domiciles.
A growing pipeline of risks could soon be transferred from markets in Africa, utilizing risk transfer tools including parametric insurance and insurance-linked securities (ILS). This will be made possible because three of the key things required for this market to flourish are starting to align.
“A successful ILS market in Africa would need three things: appetite from the investors, which is growing and they are especially interested in products like sovereign parametric catastrophe bonds; advanced sovereign pools seeking new solutions, which is the case with ARC; and a willing domicile, which we are now seeing with Hong Kong, which is looking to attract companies from all over the world to use it as a jurisdiction,” Savrassov said.
“Previously, investors have perhaps used World Bank bonds as a diversification in their traditional capital portfolios. But now, we see more what you might call ‘impact investors’, typically family offices but also pension funds, looking to have a direct investment in disaster relief in emerging markets. This goes beyond environmental, social, and corporate governance (ESG) factors and is seen as impact investing.