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Capital Markets Still Keen on ILS Investments Despite 2017 Disaster Claims: WTW

The insurance linked securities (ILS) sector is set for another year of growth as the market recovers from 2017’s natural disasters, replaces lost capital and investors show mounting interest in ILS products.

These are the findings of the latest quarterly ILS market update, published by Willis Towers Watson Securities, the investment banking business of Willis Towers Watson.

“We see no end in sight to ILS growth. The ILS community is signaling that it is ready and open for business,” said Bill Dubinsky, managing director and head of ILS, Willis Towers Watson Securities.

For 2018, he predicted, “a brutal battle for market share between, on the one hand, incumbent reinsurers and ILS investors trying to both maintain their positions and exact some rate increases and, on the other hand, other ILS investors and reinsurers trying to stake a claim to participate in additional risk.”

Despite last year’s record natural catastrophes, the report said, ILS capital is looking to both the short-term potential for modestly better risk spreads and the longer term opportunity to partner with reinsurers, insurers and insureds to fuel growth of assets under management (AUM).

The report revealed that 2017 was a record setting year for the ILS market as non-life ILS issuance continued to increase and ended the year close to $10 billion, said the report, noting that non-life ILS capital stood at $88 billion at year end 2017, a 17 percent increase from $75 billion in 2016.

The fourth quarter of 2017 saw considerable loss activity across all ILS investments with a preliminary estimate of $630 million in cat bond principal losses including hurricane, earthquake, and wildfire activity. It also saw $1.3 billion of non-life catastrophe bond capacity issued through five cat bonds. Covea Mutual Insurance Group and Validus Holdings represented two new sponsors with Hexagon Re and Tailwind Re 2017-1.

The report titled “ILS Market Update – Ready and Open for Business, January 2018” can be downloaded from the Willis Towers Watson Securities site.

Source: Willis Towers Watson Securities