ILS market grew by $5bn in 2016, with Q4 surge

The insurance-linked securities (ILS) market grew to $75 billion in 2016, up from $70 billion in the previous year, according to the latest ILS market update from Willis Capital Markets and Advisory.

Much of the growth came as the market continued to diversify into new products and perils to meet the demands of its increasingly broad group of investors, said Willis.

In the fourth quarter of 2016 the ILS market saw a pick-up, with $2 billion of non-life catastrophe bond capacity issued through five transactions, compared to $1.4 billion issued in the same period of 2015.

All fourth quarter issuances came from repeat sponsors, they did, however, bring diversifying perils to investors. Assicurazioni Generali’s Horse Capital I, covering motor third party liability risk was the first bond since 2007 to do so, while XL Bermuda’s Galilei I Re was the first bond to cover Australian tropical cyclone and Australian earthquake since 2013.

Bill Dubinsky, head of ILS at WCMA, said: “The size of the ILS market continued to grow in 2016, reaching $75 billion. Growth alone was not, however, the whole story as diversification by peril became increasingly important to investors, as did different approaches to liquidity and leverage, dependent on each investor’s appetite for ILS risk.”

On the market outlook for 2017, Dubinsky added: “Our 2017 expectation is that assets under management will continue to grow at roughly the same pace as in 2016. Leverage and diversity will also increase, led by a greater level of sophistication amongst the established investor base. At the same time, newer investors will continue to seek the greater liquidity that the traditional cat bond product offers.”

Did you enjoy reading this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.