The president of reinsurer Alleghany, Weston Hicks, has likened insurance-linked securities (ILS) to Frankenstein's monster and questioned whether the sector carries more risk because it is untested by "the big one". In the company’s annual letter to its stockholders, Hicks said ILS performed well after the 2008 banking crisis and hurricanes Katrina, Rita and Wilma, thanks to diversification and low correlation. Of course ILS fund managers are aligned with their investors best interests, as if they don’t perform for their investors they will not get paid and will not hold onto their assets for very long. But he also warned that insurers are not immune from a financial crisis.
The president of reinsurer Alleghany, Weston Hicks, has likened insurance-linked securities (ILS) to Frankenstein's monster and questioned whether the sector carries more risk because it is untested by "the big one". In the company’s annual letter to its stockholders, Hicks said ILS performed well after the 2008 banking crisis and hurricanes Katrina, Rita and Wilma, thanks to diversification and low correlation. But he also warned that insurers are not immune from a financial crisis.