{"id":5712,"date":"2025-07-14T13:00:39","date_gmt":"2025-07-14T13:00:39","guid":{"rendered":"http:\/\/studentlearningportal.com\/?p=5712"},"modified":"2025-07-14T14:08:42","modified_gmt":"2025-07-14T14:08:42","slug":"casualty-ils-growth-calls-for-built-in-legacy-exit-strategies-augment-risks-jass","status":"publish","type":"post","link":"http:\/\/studentlearningportal.com\/index.php\/2025\/07\/14\/casualty-ils-growth-calls-for-built-in-legacy-exit-strategies-augment-risks-jass\/","title":{"rendered":"Casualty ILS growth calls for built-in legacy exit strategies: Augment Risk\u2019s Jass"},"content":{"rendered":"

This content is copyright to www.artemis.bm<\/a> and should not appear anywhere else, or an infringement has occurred.<\/p>\n

As the insurance-linked securities (ILS) market continues to evolve, one of the most significant emerging areas is casualty ILS, and Jag Jass, Partner, Retrospective at reinsurance broker Augment Risk, argues that every casualty ILS transaction should also include built-in exit options with the legacy market to help expand and deepen that base.
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\n\"JagSpeaking to Artemis, Jass discussed what he believes the ILS sector can do to help support legacy players, both from a reserve risk standpoint and in terms of capital deployment.<\/p>\n

\u201cSo, for us now, one of the biggest things in the industry at the moment is the emergence of casualty ILS. And if you look at what casualty ILS does, it is a way for investors to offset any property cat exposure or invest in a non-correlated asset by utilizing the float from longer term lines,\u201d Jass explained.<\/p>\n

\u201cAnd fundamentally, we look at that in two main areas. I know Enstar touched on this with the forward exit option they put together, but on the back of every single casualty ILS transaction, we should be packaging up an exit option with the legacy market and growing that base, subsequently improving IRRs. It will allow that industry to grow. It will provide more risk capital to the industry, and it’ll provide a clean exit for the capital markets,\u201d he added.<\/p>\n

Taking it even further, Jass suggested that if you’re investor ready and looking at a casualty ILS portfolio with a tail of five to 10 years, primarily on lines like comp, GL, and you get comfortable with the risk exposure there, why wouldn’t you consider a legacy portfolio?<\/p>\n

\u201cYou look at the permanent capital that has entered the industry in the form of private equity and other large institutional investors, in my opinion, there may not be a huge demand for that going forward, considering valuations of legacy reinsurers and the capitally intensive nature of the business , which is no secret,\u201d he continued.<\/p>\n

In terms of capital usage, Jass referenced how the hurricane season of 1992 catalysed the growth of property catastrophe and ILS and suggested that legacy in ILS could follow a similar path.<\/p>\n

\u201cBut how do we bring ILS capital into the legacy space and almost say, look, if we can partner with some true capital markets and true institutional investors who are looking at a legacy book, able to diligence it, get comfortable with the exposure, they get the immediacy of the reserves to utilize the investment income, and they act as a nice alternative to some of the traditional players. And that\u2019s not to say the traditional players aren’t doing a great job. That competition is always ripe.<\/p>\n

\u201cOff the back of that, if you’re an ILS investor in legacy, you underwrite the deal, after two-three years, you take on the exposure for four years, you earn the investment income on the float, and then once you’re in the real tail end of the business, a legacy buyer can come in and say, okay, we’ll novate this book off you. And we’ll utilize the claims management; we’ll take your operational burden. Again, it’s really factoring it in as part of the overall ecosystem.\u201d<\/p>\n

Of course, it all comes down to completing that first deal and creating momentum that could pave the way for similar transactions to follow.<\/p>\n

As Jass explained, Augment Risk\u2019s ILS team includes exit options through the company\u2019s legacy platform in all the deals they place<\/p>\n

\u201cSo, when we take legacy transactions out to market, we look at it in three different areas: traditional markets, your legacy markets, , and then you have the ILS markets. All three of these separate areas are going to carry different return hurdles and different metrics. So, there’ll be different views of risk, there’ll be different ways of structuring things.<\/p>\n

\u201cNow, personally, I know we speak about syndication in the legacy market all the time, but I am not sure it will happen. And mainly because, if you look at the bedrock of it, a lot of reinsurers want claims control, a lot of them want to alleviate the operational burden. And second to that, if you can go out and write a $100 million plus transaction, your shareholders may say, why do you want to share the risk? If we’re comfortable with the exposure, why wouldn’t we take this?\u201d<\/p>\n

Jass further explained how ILS can support legacy players from a reserve risk standpoint.<\/p>\n

\u201cIf you look at a legacy players ca capital model, I imagine majority of this is their reserve risk. If you can bring in the casualty ILS market, and say look, we have the immediacy of the reserves here for you to earn a return on, it may be beneficial from a cost of capital standpoint<\/p>\n

\u201cIt provides the legacy player with a capital benefit, and for the ILS market, it provides them with a consistent return on a seasoned book of reserves that they can get comfortable with.\u201d<\/p>\n

Jass concluded by highlighting the importance of the coming years for the convergence of ILS and legacy.<\/p>\n

\u201cThe next three to five years, in my opinion, I think we’re going to see a real emergence of the ILS market in legacy. I think there’s going to be more participation. Enstar seem to be the market maker in some of these solutions, and with the forward exit option, I think that will become the norm. I think they would have become far more comfortable with greener risk, with more live underwriting, and you’re going to see things where you have trapped capital on property ILS transactions, where legacy can be used as a capital arbitrage tool to provide upfront liquidity to some of their cedents.\u201d<\/p>\n

Read all of our interviews with ILS market and reinsurance sector professionals here<\/a><\/strong>.<\/p>\n

Casualty ILS growth calls for built-in legacy exit strategies: Augment Risk\u2019s Jass<\/a> was published by: www.Artemis.bm<\/a>
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