Investors engaged in understanding how climate change could affect insurance-linked securities (ILS)


Investors are becoming increasingly engaged in understanding how climate change could affect portfolios of insurance-linked securities (ILS) and the work that is being done at investment managers to understand that, with many taking the time to “come back to the table”, according to Aeolus Capital Management’s Frank Fischer.

Speaking with us in a recent Artemis Live video interview in which we discussed Aeolus’ ongoing program of climate risk research and how that is playing into investment decision-making at the firm, Fischer provided some insight into how engaged investors are becoming on the topic of climate change risk.

Frank Fischer, Chief Analytics Officer and Dr. Pete Dailey, Head of Research, both from insurance-linked securities (ILS) and reinsurance investment manager Aeolus Capital Management, joined us recently for this interview.

Commenting on how focused investors are on climate risks and the work their investment manager is undertaking to better understand this, Fischer said that, “They’re coming to the realisation that we have committed a tremendous amount into research and understanding climate and we perhaps are the people that know it, and research it, more than anyone else.”

“On climate change specifically, I think what we’re finding now is that investors are more willing to take the time to come back to the table, and really understand and dig deeper into managers, and how they’re leveraging research and what they’re doing to try to get the right answer,” he continued.

The key question investors have, is whether research is truly being used in risk selection and portfolio management, Fischer also told us.

Dailey explained to this, “The good news for our investors is that with an explicit research function, the Aeolus view of risk will be evaluated annually and consider the very latest data, the very latest information from the previous seasons actual events and the evolving climate science.”

“We try to provide the information back to our investors in what we like to call a multi-dimensional understanding of climate risk,” Dailey added. Saying, “We want to provide different facets of the research, but also in different formats, that make it easy for our investors to consume.”

“Things may fluctuate in the industry over time, but, you know, the constant will be that climate is a huge part of many of the models and regions and perils around the world and you need to continue to improve,” Fischer commented.

Saying that, “You need to keep up your research, to make sure that you’re staying on top of changes and implementing it in your pricing.”

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