The recent credit crisis was a good thing for the Insurance-Linked Securities (ILS) sector, delegates were told at a top conference held at the Fairmont Southampton yesterday.

The fourth Insurance-Linked Securities Summit, which has been running from Wednesday through to today, featured an interactive panel discussion on the 'Property & Catastrophe Insurance Securitisation Market of Today and Tomorrow'.

It included Brad Kading, president and executive director of the Association of Bermuda Insurers and Reinsurers, Alex Krutov, president of Navigation Advisors LLC, Michael Stahel, senior vice-president and head of insurance-linked investments at Clariden Leu, and Catlin Group Ltd.'s outwards reinsurance business group leader, Mark van Zanden.

The morning kicked off with a keynote address entitled 'The Role of Catastrophe Risk in 21st Century Investor Asset Allocation: A Strategic Perspective' by John Brynjolfsson, chief investment officer at Armored Wolf.

Among some of the hot topics debated by the panel were an assessment of how the ILS market will respond to the credit crisis, an analysis of traditional and alternative structures for securitising risk, and an exploration of the types of products that may surface to address the needs of an expanding investor class, as well as addressing the impact of national and local governments on market dynamics.

Mr. Stahel gave an investor's perspective on the property and catastrophe insurance securitisation market and ILS in general, in addition to the fall out from the credit crunch and the future of the market.

"The ILS sector has shown a positive performance when we have had a huge crisis in the credit market," he said.

"Why our company was able to double our funds over the past two years was because investors were looking for a fixed-income fund with as low correlation to the credit market as possible.

"The credit market crisis is bad for all of us and the markets, but it has been a really good marketing effort for the ILS industry."

He predicts there will be "massive" growth in the sector in the future, with a shift taking place from insurance companies buying reinsurance products to using insurance-linked securities to protect their bottom line.

Mr. Kading, who had introduced the session, offered an insight into the Bermuda insurance market. He said $12 billion in capital was raised from insurance-linked securities and financial vehicles such as sidecars in the wake of Hurricane Katrina, and 26 licensed sidecars were set up on the Island in 2006 and 2007.

"The view from the Bermuda insurance community is that the next time there is a catastrophic crunch it will be a sidecar-type company that will be formed to address the issue," he said.

Mr. Krutov wrapped up the morning with an overview of where the ILS market goes from here, and the mitigating factors behind it.

He said there was "significant" interest in uncorrelated assets to the credit crisis, allied to a number of other reasons why the ILS industry was evolving, such as enterprise risk management implementation and regulatory and rating agency pressure, and increased sophistication of determining optimal capital structure.

"I think we will either see real growth due to a natural catastrophe event and other drivers or it will be relatively flat due to a lack of natural catastrophe events, continued softening of reinsurance rates or other reasons, but long-term it will grow," he said.

"It is going to grow and it is going to grow fast, but it might take a couple more years.

"It is another Katrina, it is a big earthquake, it is the way that companies look at risk, but it will stop the softening of the reinsurance rates — it will turn the cycle and it will significantly effect the transfer of risk to the capital markets."