Rapidly growing ILS market hits $93bn in 2018

The ILS market grew to $93bn of outstanding non-life capital in 2018, suggesting the market is in good health despite a quieter final quarter, according to the latest report from Willis Re.

Figures from the broker’s ILS Market Update show continued growth since 2009 using its consistent approach to defining the market, up from $88bn in 2017 and $75bn in 2016.

Willis Re admitted that the 2018 growth figure could be bigger if a broader market definition was used, saying in the report that its consistent approach “may have missed something important, the blurring of lines within the space – the convergence of convergence”.

The report highlighted how the market has changed in the past five years citing the “crumbling” of the divide between bilateral private “collateralized re” and cat bonds to the dismay of people focused on specific products.

But the report added: “The trend is more important than the absolute number and it remains up notwithstanding the noise over the past few months.”

William Dubinsky, managing director and head of ILS at Willis Towers Watson Securities, said: “We are seeing the convergence of convergence. The overall ILS figure is today a much more meaningful measurement of market size than focusing on cat bond and sidecar issuance alone.”

The report found that non-life cat bond issuance had remained strong even though there had been multiple smaller catastrophic events in 2018 and a series of catastrophes in 2017.

It said that $9.2 billion of new capital was delivered, making 2018 the “second most active calendar year ever”.

A break down of the $535 million bonds issued during the fourth quarter revealed that $125 million provides protection from California wildfire liability, $200 million for peak multi peril protection, and $210 million for earthquake compensation for US workers.

Dubinsky added: “ILS capacity and products are growing organically and dynamically as gaps between different products and subsectors fill in, and innovation and market necessity create new capacity and products. Our confidence in the speed that new solutions will emerge gives us a favorable outlook for ILS in 2019.”

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