Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

ILS investor interest still far outstripping demand


Most insurance-linked securities and catastrophe bond investors are holding onto their portfolio positions as they wait to see what the fourth quarter will bring in the way of new opportunities to deploy capital, say investment manager Clariden Leu in their latest monthly fund managers report.

During the month of September, Clariden Leu said that they have made minimal changes to their own portfolio of ILS  as they remain focused on improving their diversification and aligning their investments with their targets. They saw some opportunities to pick up some ‘interesting deals’ while hurricane Irene approached the U.S. coast due to the nervousness this storm caused in the markets. We’ve heard that from other investors we’ve spoken to and the opportunistic buying of threatened cat bonds is a trend we’re likely to see increase as the ILS market audience grows.

They expect investor interest to persist and see demand helping to cause the majority of cat bond prices to continue to tighten resulting in positive impact on their and others funds performance.

In line with sentiment from other players in the ILS and cat bond markets, Clariden Leu have seen many new investors enter the ILS space but say this has resulted in a crowded market with ample investor capital waiting in the wings, but this strong demand is not being met by new issuance volumes. This is one of the biggest issues facing the market right now. There is significant capital ready to move into ILS and cat bonds at the right price but issuance costs and comparative costs with reinsurance cover are still a factor that is holding back some parties who have investigated ILS as an option for risk transfer.

An increased understanding of the ILS asset class and continuing problems in the wider financial markets will see the heightened demand from investors continue as they look for good returns and non-correlated investment opportunities. Right now ILS and other reinsurance related investments offer some of the best opportunities for institutional investors looking to put a percentage of their working capital into asset classes that offer them good returns and diversification from wider economic risks facing other asset classes.

Register today for ILS NYC 2023, our next insurance-linked securities (ILS) market conference. Held in New York City, February 10th, 2023.

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