Introduction to the ILS market - the firms
/Now that I'm done with my dissertation, I'm on the job market.
I know that I want to work...
- ...in catastrophic risk markets; and,
- transferring new types of risk (like ENSO).
I also have a preference for:
- jobs that are flexible about the risk transfer instruments they use (reinsurance, derivatives, securities, etc.) since some instruments are better suited to specific risk types.
So, given those parameters, it makes sense to start my job search with the capital markets groups of major reinsurance brokers.
To understand my options, I've graphed a network of Insurance-Linked Securities (ILS) deals since 2005 using the network visualization framework sigma.js. (You can see a large database of ILS deals here. My code is on github.)
To start, let's look at the full network of deals. Each cedent (generally an insurance company) is represented by a yellow dot. Each broker or service provider is represented by a green dot. The cedents (yellow dots) are linked to the brokers (green dots) if they have worked together on an ILS issue since 2005.
The first thing to note is that there aren't many distinct communities. Towers Watson Capital Markets only worked with a little set of cedents, who, in turn, only worked through them. (See the small star pattern at the bottom of the graph.) Those deals focused on hurricane risk in Florida. There was also one small deal related to lottery payouts (see the tiny line in the upper right of the graph). But those were the sole exceptions to the rule that ILS is a close knit community of roughly 80 cedents working with a half dozen brokers (and another dozen service providers).
Network of ILS deals since 2005 with broker/service provider nodes in green and cedent nodes in yellow.
Below, I zoom in closer on that giant connected component of the network. Here each broker's node is proportional to the number of ILS deals it was involved in. There are four dominant brokers:
- Aon Benfield Securities;
- Goldman Sachs;
- Swiss Re Capital Markets; and,
- Guy Carpenter Securities.
Most cedents work with at least two of these largest brokers. That promiscuity gives the graph its hairball shape.
Major connected component of ILS deal network
Aon Benfield Securities helped 24 cedents issue ILS issues since 2005, the most of any broker. In the graph below, each edge is weighted by the total value of the issuance on which the cedent and the broker worked. So thicker lines mean a greater volume of issuance.
Aon's portfolio is balanced. It worked with many cedents and no single cedent dominated its issuance (i.e. the lines are of roughly equal thickness).
Network of deals involving Aon Benfield Securities
Goldman Sachs was the second most popular broker, working with 23 cedents. It's hard to see from this picture, but USAA is the thick line on the left. It accounted for an outsized portion of the issuance that Goldman touched.
Network of deals involving Goldman Sachs (edge thickness indicates the sum of the values of deals from each cedent)
Swiss Re Capital Markets' portfolio of deals covering 20 cedents was less balanced than Aon or Goldman. It benefited greatly from its relationship with Swiss Re, represented here by the fire-hose like link at the bottom.
Network of deals involving Swiss Re Capital Markets
Network of deals involving Guy Carpenter Securities
In the coming days, I'll be posting more about this network and what it means for individual firms in the ILS market.