Top ILS, catastrophe bond & reinsurance convergence stories of 2014

2014 has been an exciting year to be an observer on the reinsurance market and its deepening convergence with the global capital markets and institutional financing. As 2015 begins its worth looking back at what Artemis’ readers thought were key moments from last year.

During 2014 Artemis’ readership grew strongly again. Each month an average of 35,000 people read our catastrophe bond, insurance-linked securities (ILS), reinsurance capital trends and risk transfer news. Over the course of 2014 over 225,000 users have been recorded in total.

Between those users the pages of Artemis were viewed more than 1.5 million times over the course of the year, as readers visit Artemis from more than 200 countries of the world. This broad global risk, reinsurance, capital and investment focused audience is discerning and looking at the stories Artemis’ readers found most interesting provides a good way to review the year.

Top 10 stories full-year 2014:

These are the ten stories on Artemis that were read the most during 2014. All of these articles have been read over 3,500 times during the year, the top story had over 15,000 views. In total Artemis published more than 1,150 articles in 2014.

1. How Berkshire Hathaway thinks of reinsurance float: Warren Buffett
   As ever, Warren Buffett’s word on reinsurance is a big draw for readers and in 2014 he had more to say on the market than usual, as even Berkshire Hathaway feels the more competitive environment.

2. Did hurricane Odile just trigger the MultiCat Mexico 2012 cat bond?
   When we broke the news that hurricane Odile might have just triggered the World Bank’s MultiCat Mexico 2012 catastrophe bond it generated a huge amount of interest. Of course, three months on changes to the reported storm data showed that the cat bond had a narrow escape.

3. The death of the traditional catastrophe reinsurance model
   A constant theme throughout 2014 has been the impact of alternative capital and ILS on traditional reinsurers, which has even led some to suggest that the traditional business model may not survive.

4. Catastrophe bond markets total return 11% in 2013
   The performance of the catastrophe bond market was strong in 2013, despite yields having begun to drop. 2014’s full-year return may not be as impressive.

5. Citi Group highlights insurance securitization as a disruptive innovation
   When a niche sector like insurance-linked securities (ILS) is highlighted as one of ten disruptive themes to watch you know it is going to attract a lot more attention. 2014 has been that year for ILS, when the alternative become increasingly prevalent.

6. Biggest reinsurance firms, Munich Re & Swiss Re, see tough times ahead
   When even the largest traditional reinsurance incumbents acknowledge that times are going to be hard it suggests that the market may be going through a period of fundamental change.

7. S&P questions viability of hedge fund reinsurer business model
   The hedge fund backed reinsurance model has received considerable attention in 2014, as the number of asset managers targeting reinsurance grew and the model continued to evolve.

8. Warren Buffett: U.S. catastrophe rates too low for Berkshire Hathaway
   Once again Warren Buffett generated a lot of interest when he explained that Berkshire Hathaway would look to avoid underpriced U.S. catastrophe reinsurance business.

9. Costa Concordia insured loss rises again, close to $2 billion
   The news that the Costa Concordia loss had risen further and neared $2 billion was a big story for the reinsurance market as a whole in 2014, demonstrating the uncertainty in large marine accidents.

10. Arch, Highbridge to launch third-party capital backed Watford Re
    One of the most talked about startups of 2014 was Watford Re, which saw Arch looking to bring new strategies to its business in an effort to secure growth and outperform its peers.

Top 10 stories by month 2014:

It’s also interesting to look at the most popular stories and articles of each month, as that can give a better flavour of what exactly mattered to Artemis’ readers as 2014 progressed and how themes developed throughout the year.

January 2014:

1. Costa Concordia insured loss rises again, close to $2 billion

2. Arch, Highbridge to launch third-party capital backed Watford Re

3. Much of the new reinsurance capital will be permanent: Blackrock

February 2014:

1. Euro windstorms, UK floods add up to meaningful insurance losses

2. Munich Re adjusts renewal portfolio to avoid competition, price pressure

3. U.S. winter storm losses build. What about catastrophe bonds?

March 2014:

1. How Berkshire Hathaway thinks of reinsurance float: Warren Buffett

2. Warren Buffett: U.S. catastrophe rates too low for Berkshire Hathaway

3. El Niño forecast to produce less active hurricane season in 2014

April 2014:

1. Alternative reinsurance capital grew 28% to $50 billion in 2013: Aon Benfield

2. Record first-quarter as 2014 catastrophe bond issuance starts strongly

3. The capitalisation of the reinsurance business is changing

May 2014:

• Citi Group highlights insurance securitization as a disruptive innovation

• The ILS & alternative reinsurance market may be bigger than you think

• What if alternative capital was indistinguishable from traditional reinsurance?

June 2014:

• Blackstone reduces allocation to reinsurance on changed risk/reward

• Nephila Capital investment generates estimated 20% ROE for KKR: Citi

• Klotzbach & Gray increase 2014 hurricane forecast slightly

July 2014:

• The death of the traditional catastrophe reinsurance model

• Reinsurance market sees lowest risk margins in a generation: Aon Benfield

• BT pension scheme in record £16 billion longevity swap transaction

August 2014:

• S&P questions viability of hedge fund reinsurer business model

• Queen Street III cat bond principal repayment falls short, defaults

• Private equity follows hedge funds into reinsurance for long-term capital

September 2014:

• Structural change, lower margins, a deeper reinsurance convergence

• Did hurricane Odile just trigger the MultiCat Mexico 2012 cat bond?

• Munich Re’s resilience to soft reinsurance market is faltering: RBC

October 2014:

• Biggest reinsurance firms, Munich Re & Swiss Re, see tough times ahead

• Will pension funds, alternative capital & ILS kill the reinsurance cycle?

• Capacity alone not a sustainable reinsurance business model: Swiss Re CEO

November 2014:

• Munich Re will use alternative reinsurance capital to help it grow: CFO

• Kelvin Re, CSAM’s reinsurer with hedge fund strategy (of sorts), is rated

• LGT Capital Partners restructures insurance-linked securities (ILS) operations

December 2014:

• What happens when the music stops (reserve releases run dry)?

• Select group of reinsurers have necessary scale, diversity, strength

• Insurance and reinsurance mergers and acquisitions to increase

We look forward to continuing to follow these trends as the catastrophe bond, ILS and collateralized protection market continues to make waves across the reinsurance sector.