What ILS Investors Should Ask Before Taking Marine and Specialty Risk

Sponsor modelling packages are prepared to support a placement. That does not make them wrong, but it does mean the assumption set has usually been chosen from a defensible range rather than from the middle of it. Independent challenge exists to locate where in that range the package sits.

Which parameters drive expected loss, and what happens to attachment probability under plausible alternative values? What loss history was used, how was it trended and developed, and what was excluded? For marine and specialty, how were exposure schedules built and reconciled? How is demand surge, salvage, wreck removal and liability treated? What correlation is assumed between the covered peril and the fund's existing book?

Where the answer is an expert judgement, the useful follow-up is who made it, on what basis, and what the alternative judgement would have implied.

Position-level expected loss says little about portfolio risk. Investors need attachment and exhaustion mapped across positions, clash scenarios where one physical event touches several deals, and concentration reporting by peril, region, layer and sponsor.

For marine and war exposures, the correct clash unit is often a chokepoint or a port rather than a country, because that is the geography in which values physically pile up.

Diligence does not end at pricing. Annual reset terms, exposure drift, event notification quality, loss-development reporting on indemnity positions and hazard-environment change all need a monitoring framework agreed at the outset — otherwise the investor discovers the change from a loss notice.

Quantica Marine Insurance AB provides independent risk analysis, actuarial modelling and structuring support for independent risk analysis and second-opinion review for ILS funds, pension investors and reinsurers taking marine, war and climate positions. Founder and Chief Executive Officer Jonas Mohamed Osman Abdelghafour — known professionally as Yonas Osman — is an actuary and Financial Risk Manager (GARP) with more than twenty years across insurance, banking, actuarial modelling and model validation. Request a demonstration or an independent review.

Quantica Marine Insurance AB is under construction and not yet licensed to conduct insurance business. Nothing here is a solicitation, offer or recommendation to buy, sell or subscribe for any security, and securities placement, legal advice and investment advice are undertaken only by appropriately authorised counterparties.