Sompo steps into ILS with Blue Capital, as Endurance acquisition completes

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Sompo Holdings has now completed its acquisition of Bermudian insurance and reinsurance group Endurance and as a result becomes the owner of specialist catastrophe insurance and reinsurance linked investment manager Blue Capital Management Ltd.

The acquisition of Endurance, for a total consideration of $6.3 billion, closed yesterday and Sompo has created a new subsidiary, Sompo International which will be based in Bermuda and provide an integrated global commercial insurance and reinsurance platform for the firm.

The existing commercial insurance and reinsurance business of Sompo will also be folded into the new Sompo International unit, which together with Endurance will make both parties a larger and more meaningful player in that space.

Reinsurers lose 20% of market share to alternatives: Conning

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A new study from Conning found that reinsurance companies are under pressure from all angles alternative, with the capital markets, captives and government-sponsored entities all taking risk that was once their domain.

Margins squeezed at Bermudian reinsurance firmsThe study looks at how buying trends have shifted in the soft reinsurance market and discusses the dynamics of the last decade. Much of that period has been characterised by the rise of the capital markets and ILS funds, but other alternative sources of capacity have also pressured reinsurers, as ceding companies hunt for efficiency.

“Few sectors have undergone as much change in the past decade as the reinsurance market,” explained Matt Sternat, Vice President of Insurance Research at Conning. “The lack of catastrophes, inroads from alternative capital, and changing buyer patterns have led to dramatic consolidation and change among reinsurers.”

R&Q continues acquisition push with ICDC purchase

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Randall & Quilter Investment Holdings has acquired ICDC, a captive insurer of an American Fortune 500 company.

The acquisition is the second such deal in as many days for R&Q, which recently acquired Linco, a Bermuda-based captive subsidiary of Ameripride Services and Alsco.

ICDC, which is in run-off, had a total net asset value of $7.95 million as at 31 December 2016 with reserves estimated at circa $2.76 million.

Presence of ILS being felt in U.S. commercial property insurance: S&P

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The presence of institutional investor backed capacity from the capital markets, wielded by the world’s leading ILS fund managers is being felt in the U.S. primary commercial property insurance market, according to Standard & Poor’s.

The influence and reach of insurance-linked securities (ILS) backed capacity has been on the increase over recent years, as collateralized reinsurance structures enable the largest ILS fund managers to expand their remit into primary lines of business.

Alternative and third-party reinsurance capital from ILS funds has been adding to the pressure felt in commercial property insurance for some time, as lower reinsurance rates translated into savings for insurers and were passed on.

Reinsurers lose out to non-traditional forms of risk transfer

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Though insurers are ceding more of their premium that they were ten years ago, reinsurers have not necessarily benefited because more risk is being assumed by non-traditional risk bearing entities in various forms, according to research by Conning.

The Conning study, ‘Buyer Trends in Property-Casualty Reinsurance: A Look at US Cedants and Their Reinsurers’ reviewed the changing buying patterns and use of reinsurance by cedants over the past decade. The analysis explores changes in concentration of reinsurer panels and collateral mix among top US cedants along with changes in the proportion of ceded premium by major companies.

Plenum lifts cat bond fund beyond $150m

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Independent Zurich based insurance-linked securities (ILS) and catastrophe bond fund manager Plenum Investments Ltd. has announced that its flagship fund, the Plenum CAT Bond Fund, has now grown its assets to beyond the $150 million level.

While that may not sound like the most assets, in a market characterised by billions these days, Plenum’s cat bond fund has a track record dating back to September 2010, which is longer than many ILS funds in the market can boast.

Size is not everything in ILS and, as a recent survey of institutional investors showed, it is not always the most important element in an allocation being made, with track-record perhaps an equally, or even more, important factor.

Munich Re expands its ILS investor base, broadens sidecar lines

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Global reinsurance firm Munich Re has expanded its third-party capital ILS investor base in its collateralised sidecar and catastrophe bond issues, while also expanding the coverage of its Eden Re II sidecar to include four lines of business.

Munich Re logoMunich Re, like so many other major reinsurers, has been expanding its use of alternative capital and building relationships with third-party investors from the capital markets over many years, but 2016 has seen companies double-down on these relationships and upsize cessions to ILS investors for 2017.

Munich Re is no different, having renewed its Eden Re II Ltd. collateralised reinsurance sidecar at $360 million for 2017, around the same size as a year earlier, the reinsurer has now revealed that it broadened the sidecar’s usefulness by expanding the lines of business it ceded to the vehicle.

Pacific Alliance cat bond progress being made

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The Pacific Alliance, a Latin American trade bloc, has again been discussing issuance of a joint catastrophe bond at a recent trade meeting in the region, and progress is being made with the help of the World Bank.

Map of Pacific Alliance countries Artemis has reported before that the Pacific Alliance members, Peru, Chile, Colombia, and Mexico, were having discussions involving reinsurance firm Swiss Re about the potential for a joint catastrophe bond issue.

Now it transpires that the World Bank is also assisting the Pacific Alliance in its catastrophe bond ambitions and that progress is being made, with decisions on whether to issuer a cat bond, or not, set to be made at a future meeting.

Investors seek diversification within alternatives, positive for ILS

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Large and institutional investors, such as pension funds, insurers, family offices and endowments, have increased their allocations to alternatives in 2016 and are seeking diversification within alternatives, which should be positive for insurance-linked securities (ILS) funds.

Every report we read these days on investment trends among institutions and the larger investors, points towards an increasing interest in alternative asset classes, particularly as investors are looking for something to diversify their returns away from equities and bonds.

But now, research from Preqin suggests that investors are becoming so comfortable with alternatives that they are looking to diversify within the space, with over a third of investors now having exposure to at least four different alternative asset classes at the beginning of 2017, which is a significant increase on the prior year.

ARC and African Development Bank partner to expand risk transfer

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The African Risk Capacity (ARC) and the African Development Bank (AfDB) are to collaborate to enhance Member states’ understanding of the need for and value of disaster insurance and ultimately to help expand and embed risk transfer within countries policy and development objectives.

The African Risk Capacity (ARC), Africa’s first sovereign catastrophe insurance pool that uses parametric triggers to provide coverage, continues to push to expand the reach of its risk transfer products into African Member states.