The life ILS market, despite its smaller size compared to other alternative credit strategies, is more than two decades old; indeed, it expanded in the ashes of the global financial crisis as life insurance companies and others looked to the capital markets to reduce their longevity and mortality exposure and look for alternative liquidity options.
Today, life risk is very much a discussion point for markets, investors and policymakers as the world learns not only to live with the Covid-19 pandemic but to attempt to understand the medium to long term impact of the virus on both the broader population and specific subsets of it.
Life Risk News is bringing together investment managers, investors, mortality and longevity experts to discuss and debate the wider issues facing the life risk markets today, at the forefront of which will be the positive contribution capital market participants can have in the development of the Life Risk markets to provide liquidity, which provides a significant societal benefit, and provide investors with access to return streams that aren’t correlated to traditional financial markets, enabling additional diversification and volatility smoothing.
Chris Wells, Managing Editor at Life Risk News, says that the event has never been more topical.
“2022 was a case in point that traditional markets can all move in lockstep and that exposure to alternative return streams can provide not only portfolio defence but in many cases, true alpha returns as well. Geopolitical and market challenges remain as we enter 2023, and the life ILS market is one that stands ready to support investors.”
Mortality and longevity risk are the primary risk exposures in the life ILS market, and life insurance companies are the most common counterparty. Technology innovation in the form of insurtech is driving significant change at life insurance companies in terms of both the underwriting and sales processes, which in turn provides benefits to consumers in terms of better choice, better pricing, and better coverage. This provides more opportunities for life insurance companies to work with the life ILS market to access capital at compelling prices, supporting them with transferring risk off their balance sheets.
“The symbiotic relationship between life companies and the life ILS market works well for both sides but innovation from both the technology side and the investment side is opening up more opportunities than ever for the life ILS space,” said Wells.
That’s not to say that the next 12-24 months will be plain sailing for the life ILS market. Alternative credit allocations like life ILS are under pressure from more liquid debt strategies that are now delivering a higher yield, and there is continued uncertainty around mortality trends; life expectancy in the United States decreased in 2021 for the second consecutive year; according to the country’s Centers for Disease Control and Prevention, at birth, the average American is now forecast to live to 76.4 years old, down from 77 years old in 2020.
The challenges and opportunities in the life ILS market are numerous and nuanced, and the Life ILS Conference 2023 is set to provide investors, asset managers and service providers with informative discussions and networking as the life ILS market continues to make its case for a more permanent space in institutional investor portfolios.
