Jebi shows the importance of ILS investor communication: ILS Asia 2021


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The impact of Japan’s Typhoon Jevi in ​​2018 and the subsequent surge in losses surprised many insurance paper (ILS) investors, but the final departure from the first vendor model’s loss estimates was the model itself. It won’t be a fundamental issue of the. Industry expert.

Virtual Second Week ILS Asia 2021 Event, co-hosted with main sponsor AM RE Syndicate Inc., it started with a discussion on the importance of investor communication in managing Insurance Linked Securities (ILS).

This discussion can be viewed here if required.

Moderated by Steve Evans from Artemis, we spoke to the audience from Yuko Hoshino, Co-Head of Global Investor Relations at Securis Investment Partners LLP, and Paul Wilson, Head of Non-Life Analytics.

The session began with an overview of the Asian ILS investor base and examined the experience of investors in the region after several difficult years of loss.

Jevi’s influence was at the center of the meeting, with Hoshino explaining that even locals didn’t expect it to be the biggest loss event in Japanese insurance history when the storm hit in September 2018. Have.

“Most Japanese typically experience a lot of typhoons in the summer, so they didn’t think the insurance industry’s initial Jevi loss estimate was too low.

“When we started increasing counterparty loss estimates in late 2018, Jevi started informing investors that this would create significant uncertainty, surprised investors, and they started talking about what makes Jevi special. Hoshino explained.

In the case of Securis, Hoshino stated that Jebi impacted overall trade as losses occurred after other events in 2018 such as Hurricane Michael and forest fires.

“In contrast to Jevi, our investors were very active at major events in the USA. Most investors said the impact of the event on their portfolio long before the hurricane landed. So the Jevi case has caused many surprises for our investors, ”she continued.

According to Hoshino, investors after Jevi specifically asked questions such as the modeling of typhoons in Japan, the flood risk, the settings for the side pockets and the protection against losses.

Wilson agreed that there was a lot of talk about how Jevi and Loss were performing and, like any other event, reminded the audience that the industry had learned from Jevi.

“But in my opinion, the real problem with Jebi, and what I heard from the team, was the poor quality of the initial quotes that the model vendors received when they launched, and maybe more. It was. The dependence of the market on these initial model estimates. And it’s not really a fundamental problem with the model itself, ”said Wilson.

Interestingly, in conversations with investors, Wilson stated that he had always tried to separate the two aspects of using the catastrophe model.

“The catastrophe model serves as a tool for determining the price of an investment using a stochastic catalog of events. It is a simulation of thousands of pseudo-events that can occur in the future. There is another tool that uses this model and its only framework to calculate real-time storm damage using the inputs from real-time observations and events. Said Wilson.

“Therefore, even a good model with an accurate and robust view of risk can lead to poor real-time estimates for a variety of reasons. Separating the nature of these instruments will keep investors afloat. It’s very important to recognize and communicate, ”he added.

You can watch this session of ILS Asia 2021 here on request..

Archives all online and virtual ILS Asia 2021 conference sessions, as well as on-demand replay. Our YouTube channel Audioversion will be uploaded to a podcast in the coming weeks, which you can subscribe to here.

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