By George Abbott, Sophie Roberts

March 26 - (The Insurer) - PFAS isn't the right fit for casualty insurance-linked securities (ILS) due to the difficulty in modelling the risk, which makes it challenging to underwrite in a disciplined manner, according to Bob Forness, CEO of Multistrat, who was speaking with The Insurer TV.

“Our view is that there are risks we can underwrite and risks we're unable to underwrite. PFAS is an example where ideally we would exclude it from all coverages,” said Forness.

“It's (PFAS) not something that can easily be predicted or modelled as a risk,” he added.

In the event that one of Multistrat's transactions does have PFAS exposures, Forness noted that such exposures would be limited.

“When we're underwriting risk, to the extent it's included, we think it needs to be sublimated; there needs to be some cap on it,” Forness explained.

At The Insurer TV 2024 Casualty Panel in Monte Carlo, Bob Reville, CEO of Praedicat, stated that the expected cost to corporations from PFAS litigation in the U.S. would probably be around $80 billion.

The last two years in the insurance world have been dominated by the hardening of the casualty market. Forness thinks that some of the lines are now approaching adequate pricing again.

“Workers' compensation was discussed in terms of pricing and has been recovering over many years. Now, in our view, it is adequately priced but needs careful underwriting,” Forness explained.

Forness still felt that commercial auto hasn't reached a price point that could attract alternative or traditional capital.

“In commercial auto, we see both traditional capacity and alternative capacity being really uncomfortable about providing more support,” he said.

GROWTH PLANS

As of 2024, Multistrat had deployed $1.75 billion in capital for investors in its ILS transactions, placing 50 single and multiclass transactions since its launch in 2014. Forness said that the company is now roughly double the size it was in 2023.

“We probably doubled our size over the last two years and expect to continue doing that. We've expanded our staff, probably threefold,” Forness added.

The firm is also looking to expand its geographical presence in terms of personnel and deal-making.

“We're looking to expand through a more direct presence in New York, London and Europe generally,” Forness said.

“When the company started, we were largely focused on U.S. risk, but most of us have had experience in Europe and the UK at Lloyd’s and elsewhere, and so we're just looking to naturally expand to broader market access,” Forness concluded.

Watch the full interview to hear more about:

• The 10 years of Multistrat

• The difficulty of starting during casualty soft market years

• The challenge of providing casualty ILS products that can be understood and replicated