Cat bonds record a strong year to June 30 2020: Aon

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The 12 months to June 30 2020 saw a strong return to growth in the cat bond market, according to Aon, after a below average performance in the previous year. 

Aon noted that three of the quarters in the period saw consistent and strong issuance, with Q3 2019 being the exception.

Q4 saw a record issuance of $2.2 billion, while Q1 2020 set another record of $4 billion. Q2 2020 saw strong issuance of $2.8 billion, which was dampened by the effects of COVID-19, driving a temporary pause in primary issuances across the insurance linked securities market.

In total, $9 billion was placed in the year in review, including life and health, Aon said.

Lloyd’s launches ‘first of its kind’ parametric BI cover for SMEs

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Lloyd’s has launched a new business interruption policy, which it believes is the “first of its kind” parametric solution designed to protect small and medium sized enterprises (SMEs) against IT disruption or downtime.

The new policy pays out automatically once a company’s IT services – such as cloud, e-commerce or payment systems – are disrupted, reducing the time insurers spend assessing a loss or adjusting a claim.

The product is led by Tokio Marine Kiln (TMK) and supported by other members of Lloyd’s Product Innovation Facility including RenaissanceRe.

“We are thrilled to launch the first ‘off-the-shelf’ parametric insurance product for IT downtime. This is a great milestone for us and we are grateful to TMK, Howden and Lloyd’s Product Innovation Facility for helping us to develop our product and providing us with valuable insights and support along the way,” said Yonatan Hatzor, co-founder and CEO of Parametrix Insurance.

CEA targets $250m+ Ursa Re II 2020 catastrophe bond issue

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The California Earthquake Authority (CEA) is back once again in the catastrophe bond market with the second issuance it has sponsored so far this year, seeking a $250 million or larger source of collateralised earthquake reinsurance from this Ursa Re II Ltd. (Series 2020-1) deal.

Earlier this year, the CEA, which is a not-for-profit residential earthquake insurer for California, secured $700 million of earthquake reinsurance through a Sutter Re Ltd. (Series 20201- & 2020-2) issuance.

But for its next catastrophe bond deal, the CEA has reverted back to the Ursa Re moniker, registering a new Bermuda-based special purpose insurer named Ursa Re II Ltd. for the purpose of its latest capital markets foray.

Catastrophe bonds a win-win for governments & investors, says APEC

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The Asia-Pacific Economic Cooperation (APEC) continues to see the development of a regional catastrophe bond market as positive, highlighting at a recent workshop that cat bonds are a win-win relationship for governments and investors.

The workshop last week was convened by The World Bank Treasury alongside the APEC Business Advisory Council (ABAC) and Asia-Pacific Financial Forum, to educate on the use of catastrophe bonds as disaster risk transfer instruments for the APEC Regional Disaster Risk Financing and Insurance Solutions Working Group.

The goal is to expand the understanding of the role catastrophe bonds can play, as well as the important role insurance and reinsurance risk transfer products play in protecting the fiscal budgets of countries against impactful natural disasters.

Nat cat protection gap widened in 2019 including in North America

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Despite the fact insurance and reinsurance markets become increasingly sophisticated in their use of technology to reach customers and provide enhanced coverage, in North America, perhaps the most advanced economy in insured terms, the natural catastrophe protection gap actually widened by over 7% in 2019.

It should perhaps be considered an indictment of the efforts of the industry to close the much-discussed “protection gap”, that even the most advanced regions of the world became less protected by insurance last year.

A recent report from global reinsurance firm Swiss Re analyses the data behind global protection gap issues and found that, on a worldwide basis, insurance protection for natural catastrophes is relatively flat.

Rated paper & ILS may be favoured over collateralized UNL retro at renewals: Aon

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Retrocessional reinsurance coverage written by rated carriers, as well as other insurance-linked securities (ILS) products such as industry-loss based instruments, may find themselves in favour over collateralized ultimate net loss retro at the upcoming renewals, Aon executives said recently.

Speaking during a media briefing held in place of the Monte Carlo Rendez-vous by the brokers Reinsurance Solutions unit, CEO Andy Marcell and CEO of Aon Securities Paul Schultz implied that there could be a shift in buying behaviour, partly driven by challenges over trapped collateral.

The expectation is that more collateralized retro reinsurance capacity gets trapped at the end of this year, as retro buyers seek to protect themselves against the uncertain levels of pandemic related losses they may face.

Cat bond & ILS coupons should compensate as climate increases hurricane risk: Twelve Capital

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Climate change, variability and the expected increases in Atlantic hurricane risk that these factors will drive, is still likely to be compensated for in catastrophe bond and private insurance-linked securities (ILS) coupons, as pricing should rise and consequently returns, in line with the risk, according to ILS manager Twelve Capital.

Twelve Capital, the Zurich headquartered insurance sector specialist fund manager, works with machine learning focused climate technology company, reask on hurricane risk analysis. The pair have looked at how climate change and climate variability will influence the market and impact portfolios of ILS or cat bonds.

They expect we will see a “modest increase in Atlantic hurricane risk over the forthcoming decades as a consequence of climate change.”

Asian ILS market to benefit regional re/insurers: Fitch

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The development and growth of an insurance-linked securities (ILS) market in Asia can only be a benefit to local insurance and reinsurance carriers, as well as those operating regionally, as the capital markets capacity can help them expand their ability to underwrite and diversify capacity sources, rating agency Fitch explained recently.

Fitch noted in a recent report that Asian insurers and reinsurers are taking up catastrophe reinsurance and retrocession cover in excess of the minimum regulatory requirements to improve their risk mitigation capabilities.

In the future insurance-linked securities (ILS), such as catastrophe bonds and other securitised reinsurance or retro arrangements backed by capital market investors, are likely to assist in this regard.

Press release

Following today’s declaration of Bermuda Monetary Authority (BMA) on Cancellation of registration for Phoenix CRetro Reinsurance Company Limited the Company would like to comment as follows:

 

Despite an important role Bermuda plays in ILS environment, the country is still blacklisted as an offshore destination by regulators and central banks of Eastern European and Central Asian countries as well as Russian Federation, which makes it very hard if not impossible to operate out of this jurisdiction when developing Insurance-Linked Securities as an asset class for investors from the region.

Following recent developments at an ILS space and regulatory endeavors of Asian hubs like Singapore and Hong Kong the company shall be looking for alternative jurisdiction to continue developing its business model.

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Parametric sovereign cat bonds: the way to insure the Belt and Road

ORIGINAL PUBLICATION HERE. PDF VERSION HERE. CHINESE 中文 TRANSLATION HERE .

Countries in Central Asia and Eastern Europe that have been recipients of Chinese investment via projects associated with its Belt and Road Initiative (BRI) should use parametric sovereign cat bonds to insure themselves against the risk of natural disasters.

That is the view of Kirill Savrassov, an insurance-linked securities (ILS) and sovereign risk transfer specialist.

“China’s Belt and Road Initiative has created an even greater need for comprehensive protection solutions in Central Asia and Eastern Europe,” said Savrassov.

“China has spent tens of billions of dollars in infrastructure across the region but practically none of it is properly insured against physical damage, despite the region being at high risk from earthquakes and other natural disasters.

“In countries such as Uzbekistan, Kazakhstan or Tajikistan it is not a question of if an earthquake will hit, but when and how devastating it will be.”