ILS investors prepare for reloading

ILS investors are raising money and preparing to make new investments despite losses from recent natural catastrophes, according to the latest Willis quarterly ILS market update.

ILS investors are currently responding to the recent uptick in natural disasters by making payments to ceding companies.

None of the natural catastrophes in the third quarter – two Mexican earthquakes and three Atlantic hurricanes – was individually of the $100 billion loss amount that might trigger a major shift in pricing, according to the report. However, the aggregate losses from the quarter are likely to reach $100 billion, a magnitude that serves to remind the industry of the potential scale of losses it could face and providing an effective test of its capitalisation, ability to recapitalise and the resilience of the investor base.

“Even though this is not ‘that year’, the recent loss activity will provide some clues as to what might happen when it does occur, and we can say that so far ILS investors and traditional reinsurers have performed well, supporting insurers to serve their policyholders,” said Bill Dubinsky, head of ILS at Willis Towers Watson Securities.

“In particular, I would point to the Mexican government’s FONDEN bond where the class A notes may see a total loss of principal, delivering $150 million of disaster relief where it is vitally needed,” he said.

Interviewed for the report John Seo, co-founder and managing director at Fermat Capital said: “For better or worse, after a significant loss event many current and potential ILS investors are conditioned to put additional or first-time capital into ILS. As a result, investor interest in ILS is higher now than ever before. No doubt, this is due, in part, to an expectation that some reinsurers and insurers will firm up premiums for some programmes in 2018 and that this might have a spill-over effect on the ILS market and I expect ILS to continue to play a role in moderating post-event rate increases.”

Get the latest re/insurance news sent to your inbox every day -  Sign up to our free email newsletters

Other stories from this morning's newsletter

Swiss Re faces $3.6bn nat cat losses in Q3

Hannover Re looks for 40-50% cat rate increases in Florida

Sompo reviews FY earnings forecast after nat cat hit

Neon launches marine joint venture in Italy

Aon Benfield names EMEA & UK head of client services

California wildfire claims losses reach $1bn

Manchester Underwriting appoints Munich Re exec as claims manager

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