22: Peter Giacone, KBRA, August 2020 - evolving investor appetites & insurance-linked securities (ILS)

Our latest interview features Peter Giacone, Managing Director and Global Head of Insurance at Kroll Bond Rating Agency (KBRA), who joined us to discuss how investor appetites have changed due to the coronavirus pandemic and what this means for the insurance-linked securities (ILS) sector.  Giacone explained that financial markets in general are seeing large flows from investors and that part of this interest is being shown in the insurance and reinsurance space.  But with traditional investment classes highly volatile, institutional investors have been looking closely at alternatives, especially those that exhibit lower correlation.  As a result, the insurance-linked securities (ILS) market and direct investments into reinsurance risk bearing vehicles or funds are looking incredibly attractive at this time.  Giacone said that, "People have to adapt and that spells opportunity. I think this asset class in particular is going to start to look more and more attractive.  "A longer-term investor is going to look at ILS and say, you may have some temporary dislocations in the market when you have a high correlation, but over the long-term they're going to see that this is an asset class that clearly behaves completely independent of what's going on in other markets for the most part and therefore provides a tremendous opportunity."  We also discussed the use of ratings in ILS markets and catastrophe bonds, with Giacone explaining that he sees the potential for entire portfolios of ILS assets to be rated, rather than just individual bonds and he described how this could prove attractive to major investors such as life insurers.

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