All of our news and analysis on the retrocessional reinsurance marketplace.
Retrocession is effectively reinsurance for reinsurers, so a tertiary layer of risk transfer away from the original risk, if you consider primary, reinsurance and then retrocession.
As reinsurance is insurance for insurers, retrocessional, or retro, protection is reinsurance for reinsurers.
The retrocession reinsurance market has increasingly come to depend on the capital markets and insurance-linked securities (ILS).
As of mid-year 2022, global retrocession capacity has been estimated to be as high as $60bn, around $20bn of which is indemnity based and the rest in other formats.
The alternative capital markets and ILS funds, or investors, play a significant role in global retrocession, as too do instruments such as catastrophe bonds and industry-loss warranties (ILW).
Counterparty risks are back on the agenda in the insurance and reinsurance market, as part of carriers and regulators heightened concerns over credit risks and creditworthiness, which could serve to make fully-collateralized reinsurance through insurance-linked securities (ILS) even more appealing to ceding companies.
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Insurance-linked securities (ILS) returns are set to benefit from rising pricing in reinsurance and retrocession, which makes the market an attractive point of entry right now and leads hedge fund specialist manager K2 Advisors to an overweight assessment for P&C ILS and catastrophe bonds.
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The insurance-linked securities (ILS) market has never stood still during its relatively young, approximately 25 year history. But it’s clear that the ILS industry is acutely focused on delivering more evolutionary change and progress at this time, with the next-generation of ILS risk transfer and investment opportunities already in development.
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Lancashire Capital Management Limited, the third-party capital collateralised reinsurance underwriting arm of specialty insurance and reinsurance group Lancashire Holdings, has reported a 52% increase in fees, profit commissions and profit shares earned in 2020, over the prior year.
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Global reinsurance firm Swiss Re has increased the alternative reinsurance capital assets under management in a range of insurance-linked securities (ILS) structures to $2.8 billion, with the recently launched 1863 Fund one area of the business to benefit.
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Lodgepine Capital Management Limited, the retrocessional reinsurance ILS fund management unit of Markel Corporation, had a “terrific” year in 2020, delivering double-digit returns on its portfolio which largely avoided any loss impacts during the period.
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German reinsurance firm Hannover Re has downsized its capital markets backed K-Cessions quota share retro reinsurance sidecar facility to $610 million for 2021, a roughly 10% decrease from the prior year.
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The property catastrophe bond market experienced a record year in 2020 with around $11 billion of new issuance and leading broker dealer Aon Securities believes the positive momentum will persist.
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Nephila Capital, the largest dedicated manager of insurance and reinsurance linked investment funds and assets, is expected to benefit from growing investor interest in the sector, with inflows of more than $1 billion anticipated in 2021, according to Markel Corporation executives.
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A new dedicated insurance-linked securities (ILS) management division has been launched by specialist motor-focused insurer ERS, with former Securis executive Neil Strong taking the lead role as CEO ILS.
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