California to work with UN on sustainable insurance for climate risks


The U.S. state of California is getting increasingly serious about the use of insurance or risk transfer to provide financing against climate risks and financing to support climate adaptation and resilience building.

The state is already in the process of putting into place legislation that would allow it to purchase insurance, reinsurance, insurance-linked securities (ILS), or other alternative risk transfer (ART) structures, to help fund the economic burden from natural disasters.

This legislation stalled recently though, as arguments emerged that the state can already purchase risk transfer.

Risk managers & C-Suite lack understanding of parametric risk transfer


The insurance and reinsurance industry has much more to do to promote parametric risk transfer and other alternative risk strategies, as both risk managers and the C-Suite of major corporations lack a clear understanding of its benefits.

The increasing availability and abundance of data and advanced analytics tools, combined with alternative risk financing mechanisms, can provide an opportunity to risk managers.

Parametric triggers can bridge the gap between the two.

Is the ILS market ready to tackle cyber?


A lack of historical and contextual data continues to hinder the entry of the insurance-linked securities (ILS) market into the cyber re/insurance space, and with ‘silent’ cyber exposures adding further uncertainty, it might be easiest for the ILS sector to focus on affirmative cyber, at least to begin with.

This is according to Co-Head of Property Claim Services (PCS), Tom Johansmeyer, who recently spoke with Artemis about the ongoing and developing NotPetya cyber-attack and the potential for ILS to participate in the expanding cyber risk market.

With an economic impact of at least $10 billion, according to the White House, and insured losses of at least $3 billion, according to PCS, the NotPetya cyber catastrophe event remained mostly a property event for the first two years of development.

Gradual pick-up of ILS transactions expected in Asia: Fitch


Insurance-linked securities (ILS) and catastrophe bond activity is expected to gradually accelerate in the Asia region, providing investor interest in the ILS asset class remains strong, according to Fitch Ratings.

While insurance-linked securities (ILS) and collateralized forms of reinsurance in general are familiar concepts in North America and Europe, there has still been relatively limited activity in Asia by comparison, although the understanding of the alternatives available is increasing all the time.

Reinsurance capacity and pricing remains largely stable across Asia, according to Fitch, outside of certain loss affected pockets, with access to the capital markets helping to increase stability.


ILS has “superior historical performance” over the long-term: Researchers


Recent analysis on the return drivers of insurance-linked securities (ILS) shows that over a 15-year period, ILS funds have recorded a superior historical performance when compared with other asset classes.

In a recent article, Alexander Braun and Martin Eling of the Institute of Insurance Economics, University of St. Gallen in Switzerland and Semir Ben Ammar, Deliotte AG in Switzerland, discuss the return drivers of ILS while at the same time highlighting the inability of traditional factor models to explain the return characteristics of ILS funds. We spoke with them to gain further insight into ILS fund performance.

According to their report, existing factor models cannot explain the returns of ILS funds.

Cobbs Allen combines investment bank & insurance broker in CAC Specialty


Independent U.S. risk management and insurance broker Cobbs Allen has launched a new unit focused on bringing together investment banking and insurance to create risk transfer solutions for corporates and private equity sponsors.

The specialty broking unit CAC Specialty represents the “next wave in the long-term convergence of insurance and capital markets by combining structured finance solutions with insurance broking capabilities,” the company said.

It’s an interesting time in the broking world, as convergence of risk management, risk transfer, investment banking, structured and capital efficiency products continue to bring insurance, reinsurance and asset management closer together.

Asian Development Bank launches contingent disaster risk financing solution


The Asian Development Bank (ADB) has launched a new contingent natural disaster risk financing solution which it has named contingent disaster financing (CDF), as it seeks to deliver rapid paying risk capacity for its members after they experience significant natural catastrophe events.

Contingent disaster financing (CDF) is a mechanism by which funding can be released quickly to ADB members in support of their budgets after disaster strikes.

It’s designed to ensure they can recover better, without having to take financing from their broader budgets

Lekima the second most costly China typhoon as estimate hits $7.4bn


Typhoon Lekima is without doubt set to become one of the most expensive natural disaster events to strike China in recent years, with the latest economic damage estimate of approximately US $7.4 billion placing the storm as the second most expensive typhoon to hit China ever.

Typhoon Lekima came ashore in Zhejiang province China as a Category 2 equivalent typhoon, having weakened after passing the Japanese Ryukyu islands.

Update: An early estimate of insured losses from the storm has been pegged at US $855m+ by AIR Worldwide.

Update: Economic loss figures from official sources increased to CNY 53.72 billion, US $7.63 billion on August 15th.

Re/insurers to partner with governments & capital markets on cyber risk: S&P


Given the enormous economic loss potential associated with cyber risks, rating agency Standard & Poor’s feels it inevitable that insurance and reinsurance firms will look to both the government and capital markets to help in boosting available cyber risk capacity.

In a new report on the reinsurance market’s approach to cyber risk, S&P Global Ratings points out that the potential for cyber losses to cripple the re/insurance industry is clear, if a prudent approach to underwriting and accumulation management isn’t followed.

S&P also questions the ability of the traditional insurance and reinsurance market to deploy sufficient capacity to meet the market opportunity of cyber risk on its own, or whether that would be sensible, leading the rating agency to liken the growth of the cyber market to the catastrophe risk underwriting market after hurricane Andrew.

Argo’s use of third-party capital continues to rise


Bermuda headquartered international specialty insurance and reinsurance firm Argo Group has continued to expand its use of third-party capital during the second-quarter of 2019.

Argo has been steadily ramping up its use of third-party capital ever since it acquired Ariel Re, resulting in a situation where the company now experiences significant capital efficiencies through the use of lower-cost capital.

In fact, Argo said earlier this year that, across its London and Bermuda underwriting platforms, as much as 50% of its capital is provided by third-party capital providers.