Trapped ILS capital news

Hiscox Group, the specialist insurance or reinsurance underwriter and ILS capital manager, has reported that its reinsurance focused Hiscox Re & ILS unit has secured rate increases of 12% across its portfolio for the year so far, with retrocession up 20%, although its book shrank at the mid-year renewals.

Expectations of just how much insurance-linked securities (ILS) collateral could be trapped at the end of 2020 are on the rise, alongside the frequency of losses and total costs from catastrophe events in the United States, it seems.

David Priebe, chairman of Guy Carpenter, expects to see a further $3.5 billion to $7.5 billion of capital enter the industry before 2021, either in the form of reinsurance start-ups or as part of the relaunch of existing entities.

Multiplicity Partners, a boutique Zurich-based investment firm that specialises in secondary opportunities and providing liquidity solutions to holders of private market funds and distressed assets, is targeting the insurance-linked securities (ILS) space and wants to offer a solution to those experiencing trapped ILS collateral.

The long-awaited, significant hardening of the reinsurance market, underpinned by price increases and improving terms and conditions (T&Cs), is vital following the disappointing response to catastrophe events over the past few years, according to experts from across the re/insurance and insurance-linked securities (ILS) space.

Darren Redhead, chief executive of Lancashire Capital Management, acknowledges that four years in a row of trapped collateral, on the back of major natural catastrophes in 2017, 2018 and 2019 and, latterly, the uncertainty stemming from COVID-related claims, does pose a challenge.

The winding down and running-off of Markel CATCo Investment Management’s retrocession focused investment fund, the CATCo Reinsurance Opportunities Fund Ltd., continues apace, with the manager securing another $68.9 million release from side pockets established for potential loss reserves.

Positive rate momentum and the re-examining of terms and conditions (T&Cs) is expected to continue at the key January 2021 reinsurance renewals and beyond, while ongoing uncertainty surrounding another year of trapped capital will have an influence, according to industry experts.

The global pandemic is accelerating the hard reinsurance market, according to Jean-Paul Conoscente, chief executive officer of SCOR Global P&C.

Third-party, or alternative capital is unlikely to have a meaningful influence on potential reinsurance rate increases at the key January 1st, 2021 renewals season, according to Brian Schneider, Senior Director, Global Head of Reinsurance, Fitch Ratings.