Mitchell Rosenberg, Co-Head of Insurance-Linked Securities (ILS) at Howden Capital Markets & Advisory (HCMA), and Bill Cooper, Managing Director at HCMA, were featured in the Intelligent Insurer’s Monte Carlo Today article titled ‘Sidecars shift to the fast lane’. In the article, they discuss how casualty sidecars are moving from being seen as a niche experiment to becoming an established tool for alternative capital.
Rosenberg and Cooper point out that viewing sidecars merely as novelties overlooks their importance in asset allocation. They note that casualty risks differ from catastrophe risks because they are driven by frequency, are customized, and have less transparency.
Cooper stated: “Global risk is increasing, and insurance and reinsurance capital alone won’t be enough.”
Rosenberg added: “Three structural components are critical: capital efficiency, exit mechanisms and asset management. Lloyd’s has all three.”
The discussion highlights several trends in the sector. Casualty sidecars offer long-tail diversification for investors. There is also a growing demand among investors for greater discipline and transparency. Additionally, Lloyd’s market structure provides certain advantages for these types of financial instruments.