Reinsurance renewals news

It feels a little negative to focus on just two ILS fund strategies in this way, but as the Stone Ridge Asset Management mutual insurance-linked securities (ILS) and catastrophe bond funds are the only ones that are priced on a daily basis, they are providing valuable insights for the rest of the ILS market in […]

Another indication of the impacts of hurricane Ian for the insurance-linked securities (ILS) market is in how the publicly available net asset values of mutual catastrophe bond, ILS and reinsurance linked investment funds have been moving.

While too early for accurate loss estimates, analysts at KBW have said that they expect hurricane Ian’s catastrophic impacts will provide further fuel under property catastrophe reinsurance rate momentum, while also further disrupting the Florida insurance marketplace.

With major hurricane Ian approaching its Florida landfall, the main mutual insurance-linked securities (ILS), catastrophe bond and reinsurance linked investment funds have experienced some declines, with Stone Ridge Asset Management’s strategies leading the way.

Reinsurance rates are likely to rise by mid-teens at least at the next renewals as this will only just cover inflation and climate change related effects, with more needing to be added on top to cover cost-of-capital, analysts at Peel Hunt have suggested.

Relatively strict asset allocation protocols could become a driver for some investors to downsize their allocations to insurance-linked securities (ILS), as broader macro-economic effects and capital market volatility mean some allocations could have to be reduced, to stay within their defined thresholds.

Bringing together the capital markets and natural catastrophe risk in reinsurance, makes “deep economic sense”, according to the CEO of Swiss Re, as leveraging ILS capital is a win-win-win for his company, Christian Mumenthaler explained in our recent interview.

A true reinsurance hard market may be around the corner, particularly in US property lines such as coastal wind exposed towers, with inflation a key driver and expected to result in a need for as much as $20 billion of new capacity to soak up demand at the renewals.

Broking group Aon is expecting a strong chance for another record year of issuance in the catastrophe bond market, with the pipeline of potential deals that could get executed being as long as it has ever been for the firm.

Moses Ojeisekhoba, Chief Executive Officer, Reinsurance at Swiss Re explained this week that the reinsurer expects prices will rise at the end of year renewals, no matter what the structure being transacted is and that while its appetite for catastrophe risks continues to grow, the reinsurer will remain underweight Florida for now.