ILW demand rising, prices could soar for Japanese wind triggers

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Indicative pricing for Japanese wind exposed industry-loss warranty (ILW) backed retrocessional reinsurance protection have risen significantly in response to the now consecutive years of heavy Japan typhoon losses, as well as nervousness over where current loss estimates will be finalised.

At the same time, we’re told demand for ILW capacity covering U.S. perils is up significantly in advance of the January reinsurance renewals, as a number of major players look to all natural peril coverage in index trigger form as a way to augment their retrocession programs.

With the retro market again impacted by losses and trapped collateral in 2019, resulting in a capacity crunch, we understand that there is significant demand building for retro aggregate products that may not be satisfied at 1/1, given the expectation retro capacity could be limited.

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