Catastrophe bonds and insurance-linked securities news

The Mexican government has confirmed that it will seek to renew its MultiCat Mexico catastrophe bond protection in October, with another three-year term of catastrophe insurance protection expected to be secured from a MultiCat Mexico 2015 issuance.

The entry of alternative capital into the reinsurance market and the growth of ILS is not just expected to continue to disrupt the traditional market, it is expected to have a “profound and lasting effect” according to Fitch Ratings.

The convergence market will play an important role in both risk transfer and risk mitigation for catastrophe exposures, with the result being an expected dampening of reinsurance price volatility and a flattening of the traditional market cycle, A.M. Best says.

The government of the Philippines is once again contemplating issuance of a catastrophe bond as it looks to boost its ability to finance the nations recovery after impactful catastrophe events, such as typhoons or earthquakes.

GC Securities, the investment banking, catastrophe bond and capital markets arm of reinsurance broker Guy Carpenter, said today that it expects the catastrophe bond pricing floor, which was seen during the second-quarter, will persist for the near future.

Asia has become one of the world’s most rapidly developing regions, with a burgeoning population, rising asset values and large-scale urbanisation. However, the development of the region’s economy is hindered by high exposure to flood events and a broad insurance protection gap.

The average return of the insurance-linked securities (ILS) fund market saw its highest single month performance of 2015 so far in July, as the average ILS fund return across a group of 34 ILS, reinsurance linked and catastrophe bond funds reached 0.4%.

Changes in the global reinsurance market, exacerbated and perhaps triggered to a degree by the growth of alternative reinsurance capacity, resulting competition and benign loss activity, has been more of an evolution than a revolution, according to Guy Carpenter’s Vice Chairman, David Priebe.

While the insurance and reinsurance market find’s itself increasingly awash with capacity from all sources, the disruptive effect of the growing insurance-linked securities (ILS) and third-party reinsurance capital is seen as a key risk to re/insurers that should not be ignored.

The use of third-party, or alternative, capital and the expansion of insurance-linked securities (ILS), such as catastrophe bonds and collateralized reinsurance into Latin American markets is currently constrained, meaning its participation remains low in the region.