Trapped collateral news

We’ve learned from sources that a number of insurance-linked securities (ILS) fund managers have recently been able to further reduce the size of investment side pockets they had established related to hurricane Ian.

Hannover Re, a major player in facilitation of insurance-linked securities (ILS) arrangements, via its fronting and risk transformation services using its balance-sheet, believes that trapped ILS capital amounted to between US $5 billion and $10 billion at the end of last year.

All of the changes enacted at the latest Florida Special Session will have a positive impact on the region’s property market, but the benefits will need to be proved before reinsurers and insurance-linked securities (ILS) markets really jump back in, according to experts from across the space.

Some of the side-pockets established by insurance-linked securities (ILS) funds in the wake of hurricane Ian are now being reduced in size, as estimates from the storm continue to trend lower than originally expected, according to Artemis’ sources in the ILS investment community.

Towards the end of the year, as the challenging January 2023 reinsurance renewal season neared its completion, lower than expected loss estimates related to hurricane Ian eased some concerns related to trapped ILS capital and this assisted in clearing retrocession placements, broker Gallagher Re said today.

The recently enacted legislative reforms to Florida’s property insurance marketplace have the potential to alleviate some of the concerns of the insurance-linked securities (ILS) industry over prolonged trapping of capital, according to AM Best.

Higher-risk focused insurance-linked securities (ILS) fund strategies appear to be averaging losses around the 17% mark after hurricane Ian, according to a report from Frontier Advisors.

The apparent impairment of global dedicated reinsurance capital is set to create “generational” opportunities for underwriting companies, according to David Flandro and Michelle To of Howden Broking.

According to sources in the insurance-linked securities (ILS) investment community, side-pockets being established after hurricane Ian by ILS funds that invest in private deals and collateralized contracts, to segregate potentially loss affected investments, are ranging from as small as 3% to as much as 30% of a strategy.

Speaking this morning at a briefing held in advance of the annual Baden-Baden reinsurance meetings in Germany, Thomas Blunck, member of the board of management at Munich Re, explained that trapped ILS capital after hurricane Ian could influence reinsurance renewals across the European region.