The size of the industry loss warranty market over time


The industry loss warranty market has seen significant growth over the last decade and now sits poised to achieve as much as $7 billion of notional limit capacity during 2012, according to data from reinsurance broker Willis Re. Their recent ILW market report and outlook, which we covered in more detail here, discusses the size of the market and the expectation that it could return to the hard market peaks of capacity and rate-on-line during the year ahead.

The ILW market has been a little bit like the catastrophe bond market in terms of outstanding capacity from year to year since 2007. We haven’t seen significant growth, which is mostly to do with the tight links between ILW capacity, pricing and the broader trends in reinsurance pricing and availability.

The graph below from Willis Re shows the ILW markets capacity by year since 2003 and the average rate-on-line (RoL) over that period of time. The activity experienced in the ILW market at the start of the year bodes well for the rest of 2012 and Willis Re’s estimate of up to $7.5 billion in limit placed in 2012 looks eminently achievable.

The size of the industry loss warranty market

The size of the industry loss warranty market - Source: Willis Re

The report from Wills Re is available to download and read in full, it includes some interesting data and insight. You can download the report here.

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