istock-497318682-kodda
iStock/ Kodda
22 October 2018Alternative Risk Transfer

ILS investors, funds, buyers all now regard ILS as mainstream: Willis report

End investors, ILS funds, and buyers – the three groups active in ILS – have predominantly weathered 2017 loss activity with a view that reinsurance products backed by ‘alternative’ capital have become mainstream, according to a new Global ILS Market Survey by Willis Towers Watson.

The survey of all three constituents of the ILS market was conducted more than six months after the major 2017 losses. Responses are therefore informed by the crystallisation of ILS funds’ performance, the report noted.

Cedants and funds share the view that ILS will continue to grow, partly through increased usage, and partly by covering risks outside property catastrophe, such as property per-risk, cyber, and marine. Investors and cedants alike continue to show appetite for such transactions.

End investors confirm they see reinsurance as an established asset class. The survey therefore is counter to some observations that rising asset yields would deter new capital inflows to ILS.

The survey found that 58 percent of responding cedants use some ILS capacity, with one in four deriving more than 30 percent of their capacity from ILS; over half of non-users would consider adopting ILS capacity over the next three years; close to half of ILS buyers surveyed have recovered claims under their contracts; and over half would consider using ILS for non-property cat risks, either as part of a multiline cover or on a standalone basis.

The report concluded that 2017 catastrophe losses have not deterred end investors. Some 80 percent agreed that 2017 ILS funds’ performance was in line with expectations; end investors perceive diversification (96 percent) and non-correlation with financial asset classes as key drivers; more than half of end investors have strategic allocations between 2 percent and 5 percent of total assets; and post 2017 losses, almost half of end investors (48 percent) tactically increased their ILS allocation.

James Kent, global CEO, Willis Re, said: “The industry has widely reported the growth in the ILS market and this comprehensive survey further supports the development of ILS as an asset class despite the challenges of the catastrophe events in 2017.

“From a Willis Re perspective we see a divergence in the intent of (re)insurers to utilise ILS capacity largely driven by client type. For growth to continue, ILS investors will need to demonstrate the ability to innovate and provide optimal solutions to meet clients’ evolving needs. Furthermore the trust language, where used, will need to reflect a closer alignment with clients’ expectations. The ILS investors with longstanding and successful track records, supported by consistent and well-regarded management teams, are the ones best equipped for future success.”

Carl Hess, head of investment, risk and reinsurance at Willis Towers Watson, said: “This collaborative project mirrors our approach to the risk business. We cooperated across the components of Willis Towers Watson’s Investment, Risk and Reinsurance (IRR) segment – comprising Investments, Insurance Consulting & Technology, and Willis Re & Securities – to gain access to all the relevant market participants. That allowed us to execute the most comprehensive survey yet of the ILS market. It’s the same connected, integrated approach we use daily to develop and deliver ILS advice and solutions for our clients.”

Get all the latest re/insurance industry news with our daily newsletter -  sign up here.

More of today's news from Baden-Baden

AIG needs to regain investor confidence after cat losses: Morgan Stanley

UK insurtech Skyline to launch weather insurance in India; secures funding

Arch Insurance unveils new structure, key leadership changes

Miller to acquire London market broker Alston Gayler

AXIS hires ex-Allied World CFO for new global role

Allstate estimates $177m cat losses in September

Canopius eyes Asia Pacific expansion with key hires

Don't miss our insurtech email newsletter - sign up today

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk


More on this story

Alternative Risk Transfer
19 December 2018   Bermuda will “keep on keepin’ on” and doing what it is doing when it comes to insurance-linked securities (ILS), says Greg Wojciechowski, chief executive officer of the Bermuda Stock Exchange. Here he looks back at 2018 and forward to 2019 as the jurisdiction continues to work hard to develop and keep its solid platform.
Insurance
5 November 2018   Willis Towers Watson enjoyed solid growth and a big turnaround in its profits in the third quarter of 2018, which increased to $85 million in the period, a big turnaround of 254 percent on the loss of $54 million it made in the same period the year before.
Alternative Risk Transfer
17 October 2018   By the end 2018 the market for insurance-linked securities (ILS) is expected to reach a total volume of close to $100 billion, according to Hannover Re.