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Convergence of capital markets and reinsurance only just begun

artemisORIGINAL PUBLICATION HERE

Around twenty years into the convergence of reinsurance and capital markets there is a feeling that the trend is still in its infancy, with the direct connection of capital from institutional and increasingly more private investors to risk having a long future ahead.

The trend, of connecting investor capital to risk, really began much longer ago, of course, with investors capitalising Lloyd’s of London underwriting vehicles, however it is the fully-collateralised nature of the insurance-linked securities (ILS) market that has seen the wave of interest increase dramatically over recent years.

Around 20 years ago the first catastrophe bonds and similar transactions came to market, as the capital markets found it could securitise risk into a liquid, transferable form, which was assumed to be the most appropriate for an institutional investor.

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London should “be bold” on ILS post-Brexit: Drinker Biddle

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Following the UK’s decision to leave the EU last week, U.S. domiciled law firm Drinker Biddle & Reath LLP has provided some thoughts on what a post-Brexit world may look like for the London and UK market, citing the possibility that it may not be negative for the plans to facilitate ILS business.

Leaders, executives, analysts and observers within the insurance, reinsurance, and insurance-linked securities (ILS) landscape continue to speculate and discuss the potential challenges and opportunities that could present themselves after the UK’s vote to leave the European Union (EU).

The specialist Lloyd’s of London insurance and reinsurance marketplace and the wider London and UK re/insurance industry, is regarded as a global hub for traditional risk transfer operations, and has ambitions to become an international centre for ILS business, also.

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Aberdeen Asset Management open new funds with ILS & cat bond remit

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Investment management group Aberdeen Asset Management has opened two new multi-asset class strategy funds, both of which have mandates that allow investment into insurance-linked securities (ILS) such as catastrophe bonds.

Aberdeen Asset Management is a large investment only group with over $420 billion of assets under management and advice across its global group.

Fixed income is a major part of the Aberdeen world and as a result ILS and catastrophe bonds are already on the asset managers radar and have been included in some multi-asset strategies in the past. Now the manager has added two new funds, one a U.S. 40’s act mutual fund and the other a new multi-asset class fund strategy focused on less traditional, or alternative, investments.

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Post-Brexit uncertainty for re/insurance, low correlation highlighted

artemisORIGINAL PUBLICATION HERE

As the world digests the ramifications of the UK’s Brexit vote to leave the European Union, the equity analysts are assessing the potential impact to the insurance and reinsurance sector, particularly in the UK and Europe.

One theme emerges and it’s a reflection of a key investor attraction to the insurance-linked investments and ILS fund asset class, the low levels of correlation that insurance and reinsurance underwriting returns have with global financial markets.

In the wake of the Brexit vote, with many still in shock and financial markets continuing to digest the result, the London insurance and reinsurance market has been responding with messages of stability and hope.

Aberdeen Asset Management open new funds with ILS & cat bond remit

ORIGINAL PUBLICATION HERE

Investment management group Aberdeen Asset Management has opened two new multi-asset class strategy funds, both of which have mandates that allow investment into insurance-linked securities (ILS) such as catastrophe bonds.

Aberdeen Asset Management is a large investment only group with over $420 billion of assets under management and advice across its global group.

Fixed income is a major part of the Aberdeen world and as a result ILS and catastrophe bonds are already on the asset managers radar and have been included in some multi-asset strategies in the past. Now the manager has added two new funds, one a U.S. 40’s act mutual fund and the other a new multi-asset class fund strategy focused on less traditional, or alternative, investments.

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No immediate Brexit hit to ILS market, but structural issues to consider

artemisORIGINAL PUBLICATION HERE

So, overnight the United Kingdom population has voted in favour of leaving the European Union, in what is to many a surprising result that presents a number of potential issues for the insurance-linked securities (ILS) market to consider.

Clearly, the ILS market is an international business, with both the end investors in the sector and the assets (or reinsurance contracts invested in) sourced on a global basis. The managers of ILS investment funds and strategies are domiciled in a variety of locations and their investment vehicles are often not domiciled where the ILS managers main base is.

For a global industry whose work involves international capital flowing across borders and business sourced from markets around the world, any major political upheaval has the potential for ramifications.

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Blue Capital reports stabilising pricing environment

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Blue Capital Management, a subsidiary of Bermuda-based Endurance, has reported strong portfolio execution following the June 2016 renewal period.

The re/insurance manager explained that the stabilising pricing environment was influenced by technical pricing discipline and a continuing trend of increasing demand for open market reinsurance.

Adam Szakmary, chief executive officer and portfolio manager of Blue Capital Management, said: “We are pleased to report strong portfolio execution and promising market dynamics following the June renewal period. Overall price reductions have begun to moderate and we have witnessed a market showing continued signs of nearing a bottom with risk adjusted pricing down only 2 percent when compared to last year.

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Blue Capital cites renewal stability, reserves for catastrophe events

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The combination of technical pricing discipline and a continued trend of increasing demand for reinsurance capacity, helped moderate price declines and stabilise the market at renewals, according to insurance and reinsurance linked asset manager Blue Capital.

In an update on the mid-year and Florida reinsurance renewals for one of its funds, Blue Capital Management said that it was pleased to see pricing declines slowdown and a more stabilised marketplace, resulting in an average decline in renewal pricing of just 2%, compared to the prior year.

Blue Capital Management is a subsidiary of Bermudian reinsurance firm Endurance, specialising in insurance and reinsurance linked investment management, with a range of funds, sidecars and private mandate vehicles.

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Might not be for Buffett, but ILS shows reinsurance is a desirable asset class

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Analysts at Bernstein have highlighted continued pressures in the global reinsurance marketplace, noting recent divestment in the sector by Warren Buffett. However, as evidenced by the continued influx of ILS capacity in the reinsurance space, just because it’s not right for Buffett doesn’t mean it’s not a desirable asset.

Throughout 2015 there was much discussion about Warren Buffett, Berkshire Hathaway’s Sage of Omaha, and his views on the reinsurance landscape and its outlook for the future.

Buffett was seen to pull back on underwriting in the highly competitive property catastrophe space and in general, diminished his overall exposure to declining reinsurance pricing by reducing investment stakes in reinsurers like Munich Re.

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Reinsurers increasingly see ILS capital as an opportunity: Xuber report

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While the glut of third-party reinsurance capital continues to exacerbate the softening re/insurance marketplace, industry leaders and executives increasingly view ILS features and capacity as an opportunity, according to Xuber’s latest Global Reinsurance Survey.

The international insurance and reinsurance market began 2016 with a series of headwinds that have persisted for some time, epitomised by further rate reductions at 1/1, April and June renewals, and a supply/demand imbalance that’s exacerbated by the rise of alternative reinsurance capital.

As a result, and somewhat unsurprisingly, industry leaders and executives that participated in Xuber’s latest reinsurance market survey view the softening landscape as the biggest challenge facing the sector.