Catastrophe bonds and insurance-linked securities news

The benefits of investing in insurance-linked securities (ILS) are spreading in Asia, with South Korea the latest country where pension funds are learning to appreciate the low-correlated and relatively stable returns possible from catastrophe bonds.

Recent hurricane Hermine is not expected to pose any problems for the insurance, reinsurance and insurance-linked securities market, with insured losses expected to be relatively low and no chance of catastrophe bonds being exposed, according to Fitch Ratings.

According to international ratings agency Standard & Poor’s (S&P) there’s greater potential for claims to be disputed when protection is purchased from a traditional reinsurance firm as opposed to a catastrophe bond.

The development of the insurance-linked securities (ILS) market has helped to enlarge global reinsurance capacity, according to SCOR one of the world’s largest traditional reinsurers, and the firm says alternative capital is a complement to reinsurance, not a substitute for it.

The growth of ILS capacity backed by capital market investors in the global reinsurance market is “pressuring the reinsurance sector to work to charge less” according to A.M. Best, pressure that is not decreasing with alternative and ILS capital now contributing 20% of the markets capacity

The Gator Re Ltd. catastrophe bond transaction is once again getting closer to attaching, as the latest loss report to the end of July shows that the aggregate retention layer beneath the cat bond’s trigger has been almost 85% eroded by severe thunderstorm losses.

Almost 60% of the outstanding catastrophe bond market protects assets along the U.S. Gulf coast. And with new regulation driving a need for increased capitalisation of companies that operate in the region, AIR Worldwide has underlined the importance of ILS in reducing risks for Gulf coast offshore assets.

Regular catastrophe bond sponsor Zenkyoren has returned to the ILS market looking for at least $250 million of three-year aggregate reinsurance protection against Japanese earthquake risks, through a Nakama Re Ltd. (Series 2016-1) issuance.

A new private catastrophe bond issuance has completed and listed in Bermuda using the Artex SAC Limited Note Program. $8.947m of Artex SAC Limited – Series CX Notes were listed on the Bermuda Stock Exchange (BSX) yesterday.

Despite being untested in the face of a major loss event and their relatively short existence, catastrophe bonds have a strong history of paying claims and the payment timeline is actually similar to that of traditional reinsurers, according to Standard & Poor’s (S&P).