Capital markets may prove fickle cat bond investors

SAN DIEGO — The capital markets are interested in investing in catastrophe bonds right now, but they may be gone a year from now, an industry observer says.

“The capital markets are stepping in because they don't know where else to put their money,” so they are willing to write catastrophe bonds at attractive rates, said Michael D. Miller, president and chief operating officer at Scottsdale Insurance Co. in Scottsdale, Arizona, during a panel discussion Thursday at the National Association of Professional Surplus Lines Offices' 2015 annual convention in San Diego.

“My question is, 'What will happen when they get burnt the first time?' They will scatter on the wind,” he said. And, if interest rates rise, they will leave the cat bond market, Mr. Miller said. This is “how the dynamic plays out. If you don't like how things are, wait a year and it will be different.”

Also discussed during the session directed at the under-40 “next generation” convention attendees was how the excess-and-surplus-line market must combine the efficient use of technology with a personal touch.

“The two complement one another if done well,” said Benjamin Sloop, president of AmWINS Group Inc.'s Access Insurance Services division in Charlotte, North Carolina.

“Ultimately in our business, there is going to be a need for personal interaction, but better technology should enable us to have better service and faster response time,” Mr. Sloop said.

Hank Haldeman, executive vice president of The Sullivan Group in Los Angeles and NAPSLO president, said that while email is arguably the most efficient form of communication, it does not contain inflection, tone or “a foundation for a relationship.”

”Using a phone and getting out to face-to-face is something we harp on over and over and over, but a lot of people, not just younger people, find it very hard, “he said.

“There's nothing like getting on a plane and sitting down in front of a happy client — or, even more so, an unhappy client — and it's amazing what that does,” he said. “I don't know of any other way.”