ILS investors ready for Florida June renewals

Insurance-linked securities (ILS) investors are reloaded and ready for the 1 June 2018 Florida renewals after significant losses in the second half of 2017 which saw record natural catastrophes from hurricanes, earthquakes, and wildfires in North America, according to the latest ILS Market Update by Willis Towers Watson Securities.

Outstanding capacity under catastrophe bonds is greater than ever, the report states.

The first quarter of 2018 saw $3.1 billion of underwritten, widely-distributed non-life ILS capacity issued through twelve catastrophe bonds, compared to $1.7 billion through five bonds in the same quarter of 2017. It marks the largest-ever first-quarter issuance in the history of the non-life ILS market, and the third-highest quarter ever, according to the report.

Overall, $26.6 billion of non-life capacity was outstanding at the end of the quarter, up $1.1 billion to a record high. Most were market-diversifying transactions, including bonds for first-time sponsors Chile, Colombia, and Peru, and by repeat Japanese cedants Zenkyoren, Mitsui Sumitomo Insurance, and Tokio Marine & Nichido Fire.  As a result of this diversifying issuance, only 63 percent of outstanding capacity is exposed to US Wind, the lowest in the last ten years, the report stated.

“We expect the current trends in ILS growth to continue,” said William Dubinsky, managing director and head of ILS. “Without a true surprise loss, like an ice-storm in Miami, end-investors will continue to allocate capacity to ILS. Yield increases under government bonds are expected to be neutral or maybe even slightly positive for issuance and asset growth, and even more importantly, we will continue to see a trend towards true syndication, reducing the power of large leading markets. All this will put the reinsurance market’s traditional pricing cycle on life support.”

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