Conservative institutional investors are sometimes slow to recognise the true value of insurance-linked securities and cat bonds as an investable product, the Bermuda Risk Summit heard this week.

ILS professionals chronicled the dramatic growth in the industry, Bermuda’s role in its development and the distinctive nature of the asset class that could be mystifying and uplifting at the same time.

A summit panel discussed alternative risk transfer and the evolution of risk capital as exhibited in the ILS market, which has grown from a niche segment of $10 billion to $15 billion some 20 years ago, to $120 billion today.

The panel was moderated by Greg Wojciechowski, CEO of the Bermuda Stock Exchange.

It included Stephen Moss, head of investor analytics at Aeolus Capital Management, who backed the moderator: “Your point Greg that there is a social good aspect to this asset class is brilliant.

“We are actually supporting insurance products which are doing real world good. And that means that to some extent, this is not financial engineering. This is actually supporting something which has real world value.”

But he conceded that as knowledgeable as institutional investors are, it is not always that easy to show them this is a class of investable assets.

“I still think this is something,” he said, “that is quite difficult to get time on an investment committee to talk about.”

He said: “There are still big pockets of the world who have never heard those three letters (ILS) next to each other. And so there's a lot of responsibility.

“I think we have to try and present it in a way which is easily consumable, try and demystify some of the underlying risks, and try and remove that informational asymmetry that sits on our side versus our investment side.”

Sarah Demerling, partner at Walkers, said there had been an incremental product development in the market, as regulatory changes arguably can be credited with driving the market.

She said: “On the evolutionary side, yes, it has been moderate and layered, but I think the impact has been revolutionary. It has changed the rules of writing cat risk finance.” She said Bermuda played a very important part in ILS development.

Brant Loucks, managing director, partnership capital and ILS, at Vantage, summed up by noting how remarkable it was that Bermuda had worked hard to really carve out a “superior niche”.

He said: “I think it has been an evolution and also a revolution.” He added: “I think we've done a really good job of slowly and peacefully, building out a wonderful infrastructure for this market that's really investor friendly, and has all the same controls and best practices that you see across other broader markets.”