“The capital markets that have suffered significant losses on market-related risks are now far more open for uncorrelated investment opportunities with long tail,” he said.
“We see a broader, increasing flow of cedants, reinsurers and brokers coming our way with transactions that are reflecting a deal flow the traditional market would try stay away from.”
He cited longevity and long-term care risks as examples.
Pandemic losses have also piqued more interest in parametric or index-based transactions linked to mortality indices.
Vesttoo is looking to bring in generalist capital market investors for longer-tailed risks by making deals more accessible – structuring them in swap format, for example, or looking to get financial ratings on the risk of default.
It also believes AI tools will help to bridge the gap between longer-tailed insurance risk and the duration of investment structures capital market investors are willing to accept.
Bertele said that, on one longevity deal the firm had done, it had “managed to squeeze down the basis risk associated with 40 to 50 years… longevity into a five-to-10-year instrument”.
AI also allows a broader set of investors to consider insurance risk, he argued.
“The broader capital markets are not used to understanding actuarial tools,” he said.
“They would like to see an independent, objective and non-judgement-based tool that processes the risk and presents them with the investment opportunity.”
Earlier this year, the Vesttoo CEO told this publication the firm was hoping to structure deals worth $600mn-$1bn of limit this year.
