OLDWICK, N.J.--(BUSINESS WIRE)--In this A.M.BestTV episode, Emmanuel Modu, managing director and global head of insurance-linked securities (ILS), A.M. Best, said some ILS funds have engaged with or even started reinsurers in order to simplify operations or reduce fronting costs. Click on http://www.ambest.com/v.asp?v=modu218 to view the entire program.
“What A.M. Best has noticed is that ILS funds are now seeking actually more alliances with reinsurers,” said Modu. “In fact, they are seeking alliances through fronting arrangements, and in some cases, actually starting their own insurance carrier or helping to facilitate the start of carriers.”
Modu said there are several motivations for an ILS fund to pursue becoming a rated reinsurer, such as becoming more efficient and perhaps eliminate fronting arrangements, which can actually cost them 6% to 10% of premiums. They also want to eliminate some of the trust structures they have to create for these transactions.
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