Willis Group: Insurance-Linked Securities Growth Stabilizes; Product Mix in Flux
However, total ILS assets under management continue to grow, albeit at a slower rate than the record breaking pace of recent years.
“The insurance-linked securities market is at an inflection point,”
Bill Dubinsky, Head of ILS at WCMA, explained. “Despite the continued downward pressure on reinsurance rates, investor appetite remains strong and we’ve seen net new capital come into the re/insurance arena during 2015. However, the proportion of Rule 144A catastrophe bonds issued compared to other forms of ILS is down as investors have shifted towards more illiquid products, such as private cat bonds and collateralized reinsurance.”(**)
The report questions if this development signals a structural shift or just a ‘head fake’.
“There are arguments for and against,” Dubinsky said. “To an extent, the shift illustrates increased investor confidence as the market matures. Over time, investors have become more comfortable and knowledgeable about reinsurance risk and are now more receptive to move into more illiquid products with greater confidence. However, this shift is also a sign of more immediate changes within the industry as the recent flurry of M&A activity, coupled with changing program design, has put reinsurance needs in a state of flux.
“Whether or not the shift away from 144A catastrophe bonds is permanent or temporary, competitive tension continues to provide ceding companies and investors with ample product choice, both to cede risk and invest,” he concluded.
The WCMA report also highlights the emergence of
Issuance by Domicile
|Q3 2011 LTM||Q3 2015 YTD|
Source: WCMA Transaction Database as of 09/30/2015.
Note: Data excludes private ILS deals
“This is a structural change,” Dubinsky said. “Since the start of the market the
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(*) The 19% year-on-year decrease would increase by 1% when adjusted for the 2014 & 2015 Everglades Re deals.
(**) For a full explanation of Rule 144A catastrophe bonds, private catastrophe bonds, collateralised reinsurance and other ILS products, please read the
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