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.

[...]