Catastrophe bonds and insurance-linked securities news

Analysing the insurance-linked securities (ILS) market outlook for the third-quarter of 2023, K2 Advisors, the hedge fund focused investment management unit of Franklin Templeton, believes spreads could tighten further, especially in catastrophe bonds, but it remains constructive on ILS and has now signalled an overweight view on industry-loss warranties (ILW’s).

The acceleration of activity in the catastrophe bond market in 2023, as cedent demand for covers in the upper-layers of their reinsurance towers has risen and the ILS market has responded to it, is seen as something that will positively benefit the bottom-line at RenaissanceRe.

Pure catastrophe bond funds as a group were up an impressive 7.17% for the first-half of 2023, narrowly beating the 6.91% average return of the private ILS funds that invest in collateralised reinsurance and retrocession opportunities as well, the latest data from ILS Advisers shows.

Aon’s private catastrophe bond platform Randolph Re has completed a new issuance of $45 million of Randolph Re (Series 2023-3) private cat bond notes that are exposed to wildfire risks, for an unnamed sponsor that we assume will again be California headquartered property casualty insurer Mercury Insurance.

Executives from broking giant Aon would not be drawn to comment on the market issues around potentially invalid collateral, but President Eric Andersen did say that letters of credit (LOCs), as one of the forms the broker uses to match capital with risk, do bring the kind of capital they need for their clients.

According to Conduit Re CEO Trevor Carvey, when it came to securing the reinsurers first slice of retrocession from the catastrophe bond market this year, the pricing for the firm’s debut $100 million Stabilitas Re Ltd. (Series 2023-1) was “in our sweet spot.”

Everest Group, formerly known as Everest Re, has reported record growth in its reinsurance segment, as the company leaned into the hard market conditions to secure higher returning business.

Insurance-linked securities (ILS) investor appetite may still be challenged towards the end of this year, which alongside a lack of confidence that any meaningful reinsurance start-ups could get to market in time for the renewals, leads RenaissanceRe’s CEO Kevin O’Donnell to believe the hard market can persist.

CSC, a provider of global business administration and compliance solutions, has announced the hiring of former Citi executive John Cuciti as a Senior Product and Relationship Manager for Delaware Trust Company, with a remit to help expand its escrow, project finance and reinsurance trust business.

RenaissanceRe has reported a significant year-on-year uplift in its fee income earned from third-party reinsurance capital and insurance-linked securities (ILS) operations, with the second-quarter 2023 seeing the total earned rise by 65.5% to $56.7 million.