Catastrophe bonds and insurance-linked securities news

Insurance-linked securities (ILS) capital overall is only growing back slowly, with some fresh capital raising largely just replacing that which had been lost due to catastrophe events or investor redemptions and exits, rating agency AM Best explained in a new report.

Speaking this afternoon during a renewals focused panel discussion hosted by Aon’s Reinsurance Solutions, Sven Althoff, Member of the Executive Board for P&C at Hannover Re, explained that introducing event-based wordings to cyber insurance could open the doors to broader capital markets and ILS involvement.

US primary insurer Allstate has reported yet another costly month of catastrophe losses for August 2023, reporting some $641 million of cat losses for events that occurred in the month, with around half coming from the Maui wildfire.

The retrocessional reinsurance market capital supply remains disciplined, which means capacity for retro protections is still not abundant and so this has been creating some difficulty for reinsurance firms that have relied on it in the past, Fitch Ratings has said.

A study undertaken by reinsurance industry participants and consultants in Germany has proposed a three-layered approach to managing peak disaster risks, with the industry using catastrophe bonds to diversify risk into the capital markets, while the government would be expected to take the tail risks of really significant catastrophic events.

Historically, the reinsurance industry has picked up the tab at the Monte Carlo Rendez-Vous event, in a demonstration of the capacity providers keeness to maintain the good relationships they have with cedents and hold onto shares in their renewal programs.

In the wake of Tom Johansmeyer, the former Head of Verisk unit PCS, joining the Ardonagh Group reinsurance broking division Inver Re in Bermuda, the company has now launched an integrated global index practice and sees an advantage in leveraging his experience in ILW’s.

If the insurance and reinsurance industry is to truly narrow and ultimately close protection gaps, the upsurge in demand for cover that would result from this means the capital markets have a key role to play, Christian Mumenthaler, the CEO of global reinsurer Swiss Re told us recently.

The delta between pricing in insurance-linked securities (ILS) and traditional property catastrophe reinsurance is providing “a clear signal” to the market and provides further competition for peak risks, Aon’s Reinsurance Solutions has said.

According to analysts at KBW, in summing up their takeaways from the recent Monte Carlo Rendez-Vous meeting of the reinsurance industry, the capital flows currently experienced and being anticipated by the industry are not likely to disrupt discipline at the end of year renewals.