The sixth in this series of articles featuring the thoughts of leading figures in insurance-linked securities (ILS) and reinsurance on the market as we move into 2016 features Luca Albertini, CEO of insurance linked securities investment manager Leadenhall Capital Partners LLP.
We asked for participants thoughts or predictions on the prospects for the ILS market, catastrophe bonds, collateralized reinsurance as well as reinsurance or catastrophe risks as an asset class in 2016.
Luca Albertini is Chief Executive Officer of specialist insurance and reinsurance linked investments manager Leadenhall Capital Partners LLP, a joint venture established between its management and insurer and reinsurer Amlin Group
Luca offered some thoughts on the recent reinsurance renewal, and what 2016 might hold for the ILS sector.
His response follows in full below:
Renewals reports highlight that the markets (ILS, US perils and retro) with a strong component of collateralised capital softened less sharply (or in the case of ILS, hardened), than other parts of the insurance space.
My view is that this occurred both due to the fact that the traditional markets could not find additional efficiencies for peak perils in their capital models (whilst the stronger softening for diversifiers shows that the rating model efficiencies are being fully exploited by traditional markets), but also due to collateralised markets and their investors no longer being available to suffer material additional pricing reductions.
The combination of these two trends have supported pricing in US perils which is good news given that they are driving the profitability of most of the collateralised market ventures.
ILS has hardened and as a result we have seen diminished interest on the primary issuance side. The question for 2016 is whether new issuance will be sufficient to replace maturing stock.
Whilst I’d like to be surprised the absence from the pipeline of some large historical originators may lead to a small shrink of the stock, which will in my view lead to a small full year softening of the ILS market as investors will turn more to secondary market.
If this occurs early enough we may see some traditional sponsors coming back to market in Q4 or early in 2017 with ILS and traditional markets continuing to converge.
On the investor side we believe that the mild rate rising (which are taken into account in the funds returns which are off a floating base) coupled with troubled traditional markets and commodities market will most definitely not deter, but to the contrary will further promote our sector with institutional investors.
Our thanks to Luca Albertini for his time.
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Artemis’ Q4 2015 Catastrophe Bond & ILS Market Report – Outright market growth continues
We’ve now published our Q4 2015 catastrophe bond & ILS market report.
This report reviews the catastrophe bond and insurance-linked securities (ILS) market at the end of the fourth-quarter of 2015, looking at the $1.525 billion of new risk capital issued and the composition of the cat bond & ILS transactions completed during Q4 2015. The report also includes a review of the full year 2015 issuance and commentary from co-editor GC Securities.