Trapped ILS capital news

What is trapped collateral, or trapped ILS capital? When an insurance-linked securities (ILS) contract is seen to be at-risk of facing losses, sometimes the cedent can call for the collateral (or capital backing the ILS deal) to be trapped or frozen, so it remains available while loss development continues.

The collateral is trapped and unavailable for reinvesting into new ILS contracts, which can create a drag on ILS investment portfolios. The ILS capital can remain trapped for months or years until the ultimate loss associated with the contract is clear and a payout is deemed due or otherwise.



CATCo retro fund gains 8% as wildfire claims reduce (possible subrogation)

The CATCo Reinsurance Opportunities Fund Ltd., the listed, retrocession focused insurance-linked securities (ILS) fund strategy managed by Markel CATCo Investment Management, has gained roughly 8% in the last month thanks to a further reduction in claims from 2017 and 2018 wildfire loss events. It's the second time this has happened for read the full article →

ILS Capital’s Prospero Re in accident year improvement, but Jebi loss creep persisted

According to a rating report from KBRA, ILS Capital Management’s reinsurance company Prospero Re Ltd. reported an improved accident year combined ratio for 2020, but its calendar year result was affected by loss creep largely related to 2018's typhoon Jebi. Prospero Re Ltd. is the rated reinsurance vehicle of Bermuda headquartered read the full article →

SBAI highlights need for strong governance in ILS side-pocketing

The Standards Board for Alternative Investments (SBAI) has published a new document that discusses the practice of side-pocketing within the insurance-linked securities (ILS) industry and explains the need for strong governance, transparency and robust disclosure when it comes to reserving for potential losses. The practice of side-pocketing is broadly used in read the full article →

Hiscox ILS fees rise on improved fund performance in 2020

Hiscox ILS, the insurance-linked securities (ILS) and collateralised reinsurance underwriting unit of specialist underwriter Hiscox Group, has reported a rise in fee income earned from its ILS investment management business in 2020. Hiscox's ILS funds saw their assets under management decline slightly to $1.4 billion at the end of 2020, down read the full article →

ILS market COVID-19 losses “kicked down the road”, AM Best warns

The fact cedents allowed insurance-linked securities (ILS) capital to be rolled over into reinsurance renewals rather than trapping it for potential losses from the pandemic, for the ILS market "amounts to kicking the can down the road for COVID-19-related losses," according to AM Best. The rating agency warns that this could read the full article →

Trapped collateral concerns overblown at 1/1, but COVID discussions continue

At the recent January 1st 2021 reinsurance renewals, the expectations for significant impairment to some insurance-linked securities (ILS) strategies because of trapped collateral due to exposure to the COVID-19 pandemic proved overblown. As the end of 2020 approached, some were forecasting that a significant amount of insurance-linked securities (ILS) capital could read the full article →

Hiscox ILS funds AuM slides to $1.4bn, but growth targeted for Hiscox Re & ILS

Hiscox Group, the specialist insurance or reinsurance underwriter and ILS capital manager, says its reinsurance and insurance-linked securities (ILS) unit Hiscox Re & ILS is seeing the best market conditions in at least five years, with an expectation of a return to growth. CEO Bronek Masojada commented this morning, "In 2021, read the full article →

ILS fund managers negotiate improved terms, buffer loss clauses at renewals

The ongoing renegotiation and fine tuning of terms and conditions related to insurance-linked securities (ILS) capital deployment continued at the key January reinsurance renewals, with ILS fund managers gaining some more ground. Terms and conditions had weakened across the reinsurance and ILS market during the prolonged period of softening of market read the full article →

Quota shares & aggregates drive reinsurance cat losses in 2020: Jefferies

Industry losses from catastrophes and severe weather events are estimated to have reached $87.3 billion in 2020 by the Jefferies equity analyst team, but with frequency a significant factor, it's assumed the main source of losses for reinsurance capital was through quota share and aggregate covers. In reviewing 2020, the analyst read the full article →

Some ILS funds continue to set small COVID business interruption reserves

A number of insurance-linked securities (ILS) funds have continued to report small increases in losses and reserves set related to business interruption claims from the Covid-19 pandemic, we understand, which continued to weigh on results over the last two months. Clarity over the extent of business interruption losses that will be read the full article →