ILS investor demand moderated April renewal pricing: Willis Re

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Strong demand from insurance-linked securities (ILS) investors, in particular for publicly traded catastrophe bonds, helped to moderate overall reinsurance renewal price increases at April 1st, according to Willis Re.

willis-re-logoThe reinsurance broker detailed the April reinsurance renewal pricing environment last week, saying that renewal market conditions followed the trends seen in January and before.

Highlights on pricing were +2.5% to +5% increases for Japan earthquake, +5% to +20% depending on catastrophe impacts for Japanese wind and flood, increases of +25% to +40% for risk loss hit Japanese property programs and flat to +15% for risk and catastrophe loss hit US nationwide programs, according to Willis Re.

But price increases could have been higher, the reinsurance broker suggested today, if it weren’t for the strong appetite for risk at current pricing levels from insurance-linked securities (ILS) investors.

“Demand from insurance-linked securities (ILS) investors proved strong, particularly for capacity made available through publicly traded bonds, which helped to moderate overall price increases,” Willis Re explained.

Willis Re Global CEO James Kent explained that this strong investor appetite proved helpful for “buyers seeking to renew or source new capacity from ILS markets,” as it served to “dampen overall program price increases.”

“Significant demand persists for the Cat Bond product,” Willis Re said, which it notes was “exemplified by the vast majority of issuances both upsizing in terms of capacity issued and pricing at the bottom or below the initial pricing guidance,” as we explained in our latest quarterly cat bond market report that was published earlier today.

Investors continue to value the cat bond as an investment structure, given its transparency and clear definition of covered perils.

“This trend has allowed many primary US and Japanese sponsors to secure competitively priced protection in Cat Bond form ahead of the 1.4.2021 and 1.7.2021 renewal dates, simultaneously guaranteeing these prices for a multi- year period, protecting against a hardening market,” Willis Re explained.

Download our new catastrophe bond market report here.

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