ILS Diversifies Beyond Catastrophe Risk as IAG's $13.5B Greensill Liability Lingers
By The Reinsurance Daily Editorial ·
ILS Diversifies Beyond Catastrophe Risk as IAG's $13.5B Greensill Liability Lingers
Enstar Targets ILS Fronting for Diversified Fee Income
Legacy acquirer Enstar is selectively developing its fronting business for Insurance-Linked Securities (ILS) capital, viewing it as a source of diversified, fee-based income. Dimitar Zaprianov, speaking at a recent event, outlined a strategy where Enstar provides underwriting expertise and rated paper, allowing ILS funds to access risks beyond property catastrophe. The structure typically involves Enstar retaining a small portion of the risk while ceding the majority to its ILS partners. For example, Enstar might participate in a profit-sharing arrangement, retaining 20% of the underwriting profit while the ILS capital provider takes on 80% of the risk and reward. This allows Enstar to leverage its underwriting platform and generate revenue from its $6B asset base without committing significant capital to volatile lines.
Our goal is to selectively develop this as a diversifying solution... We want to leverage our underwriting expertise to provide ILS capital with access to new, non-correlating risks on our paper.
Singapore's MAS Champions ILS for Infrastructure Risk Transfer
The Monetary Authority of Singapore (MAS) is actively promoting the use of ILS to fund and transfer risks associated with large-scale infrastructure projects. The regulator highlighted the significant financing gap in Asia, with annual investment needs estimated at $280 billion versus current spending of approximately $210 billion. MAS views ILS and catastrophe bonds as a complementary mechanism to traditional insurance and financing, capable of absorbing specific project risks like construction delays, non-completion, or certain operational liabilities. This initiative aims to attract new forms of capital to the region and create a new, non-catastrophe-linked asset class for ILS investors seeking diversification from traditional weather and earthquake perils.
Insurance Australia Group States Greensill Settlement Remains Unfinalized
Insurance Australia Group (IAG) has confirmed that a final settlement regarding its exposure to the $13.5 billion collapse of Greensill Capital has not been reached. The exposure stems from trade credit policies sold by its former subsidiary, BCC. IAG has been in ongoing negotiations with Greensill's administrators and other involved parties. The firm previously took an after-tax charge of approximately A$85 million related to the matter, but the lack of a finalized agreement continues to represent a source of financial uncertainty for the carrier and its reinsurers on liability towers.
EPIC Continues Expansion with Acquisition of Korotkin Insurance Group
EPIC Insurance Brokers & Consultants, which reports over $1 billion in annual revenue, has acquired Michigan-based Korotkin Insurance Group (KIG) for an undisclosed sum. The acquisition adds KIG’s specialization in property & casualty and employee benefits to EPIC's national footprint. Adam Meyerowitz, President of EPIC, noted the move enhances their Midwest presence. This transaction demonstrates continued momentum in broker consolidation, with EPIC itself being part of Galway Holdings, a larger platform with reported revenues of $7.7 billion, creating larger and more complex portfolios for reinsurance partners to assess.
Key Takeaways
- Enstar's pursuit of non-cat ILS fronting and Singapore's push for infrastructure ILS signal a coordinated market effort to deploy alternative capital beyond property risk, creating new opportunities for cedants with complex, long-duration liabilities.
- Underwriters should anticipate negotiating with increasingly large and sophisticated brokerages, as demonstrated by the EPIC acquisition, which is part of a $7.7 billion revenue platform demanding more complex program structures and capacity.
- The unresolved IAG settlement from the $13.5 billion Greensill collapse serves as a reminder of systemic risk in the trade credit market, warranting scrutiny of exposure concentration and underlying credit quality in specialty liability reinsurance programs.
- Enstar's proposed 80/20 risk/reward split on new ILS ventures provides a concrete starting point for structuring deals that transfer non-cat risk, such as the infrastructure exposures championed by Singapore's MAS.
Sources
Enstar sees fronting for ILS capital as diversifying solution to selectively develop: Zaprianov — artemis.bm
ILS complementary for transferring, funding risks of large infrastructure projects: Singapore’s MAS — artemis.bm
Insurance Australia Says Greensill Settlement Isn’t Finalized — insurancejournal.com
EPIC Acquires Michigan’s Korotkin Insurance Group — insurancejournal.com