Replexus was founded by Cedric Edmonds. The ultimate goal of Replexus is to move Insurance Linked Securities (ILS) Funds away from the 'traditional reinsurer' model.
Funds raise short-term capital from investors in order to invest in the ILS market, which purports to be a securities market with liquidity and the ability to sell securities in order to raise cash.
Increasingly, in order to access more diverse business ILS funds have been putting funds in illiquid investments fronted by reinsurance paper (fronted rather than purely collateralised reinsurance). As is often the case, Warren Buffet was quite correct when he said, "Reinsurance is like hell ... easy to enter but impossible to leave!"
For ILS funds the great danger is that at times of severe market dislocation there is a risk that investors will wish to redeem their participation requiring fund managers to raise cash by selling off assets. For assets to be sold they must be in a form to sell, not tied up behind a reinsurer as part of an opaque portfolio which, even if it is theoretically a transferable instrument, is not in practice.
Extended liquidity terms are fine, however with chunks of portfolios in extension fund managers may have liquidity issues even with long lock-ups. This would result in funds gating and then potentially a contagion effect throughout the asset class. Should this happen it could be a generation before the asset class truly returns.
Replexus sees this issue and the solution; to create a liquid market of securities on an electronic platform to replace the illiquid reinsurance model. The ILS market are fund managers and securities traders, not reinsurers issuing rated paper and holding risk until their extinction. Their strength is the ability to move and trade risk. The ILS market, like any team, should play to its strengths and not its weaknesses; they should not try to behave like reinsurers, which they are not.
Let reinsurers be reinsurers, we are the ILS market, we do things differently, have our own unique strengths and are here to stay.