Interest in ESG investing boosted by Covid

ORIGINAL PUBLICATION HERE

One of the side-effects of the Covid-19 crisis has been an increased interest in ESG investing by UK investors, a recent Aviva survey reveals.

ESG – Environmental, Social and Governance – is now the commonly-used term to describe the three main factors in measuring the sustainability and societal impact of a company or business. Other terms that might be used include ethical, sustainable, responsible, green and Corporate Social Responsibility (CSR) amongst others.

The survey of over 500 people with investments found that over half (55%) said that the pandemic had had an impact on their likelihood to take ESG factors into consideration when deciding where to invest their money. Amongst those who said they already consider ESG, 81%  said the pandemic made this even more important.

And this new awareness of the importance of ESG has been borne out by customers’ investing behaviour on Aviva’s Direct platform.  The value of new investments in ESG funds in the six months since March has more than doubled compared with the preceding six month period.  Investing in other types of funds, meanwhile, has remained steady.

ESG fund assets forecast for explosive growth, a huge ILS opportunity

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The rapid growth of ESG (environmental, social, governance) appropriate investment products is set to create a “paradigm shift” in investment markets, which could lead to more than 50% of European mutual fund assets invested in ESG funds as soon as 2025, according to PwC.

In a recent report PwC highlights the stunning growth potential of ESG investing, forecasting a base case 21.9% compound annual growth rate (CAGR) from 2019 to 2025 and a best case CAGR of as high as 28.8%.

Those stunning growth projections go some way to explaining the focus in insurance-linked securities (ILS) and reinsurance-linked investments on developing ESG appropriate investment strategies, policies and driving home the features of ILS as an asset class that make it ESG appropriate from the start.

Cat bond activity to pick up, issuance conditions attractive: GC’s Des Potter

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Cat bonds are set to buck the trend elsewhere in the ILS market, with a strong issuance pipeline for Q4 2020 and Q1 2021. This is according to Des Potter, managing director ILS origination and structuring at GC Securities, part of Guy Carpenter, in an interview with Artemis.

Encouraged by the firming of reinsurance and retrocession rates, he thought cat bonds would help fill the capacity gap in the retrocession market, where the availability of collateralised aggregate protection has dropped off significantly since 2019.

“We’re seeing a shift away from collateralised reinsurance into the bond market to try to reduce some of the pressure that may exist because investors in the collateralised reinsurance space are pulling back. We’re expecting to see quite an active Q4 in terms of cat bond issuance.”

政府和机构指望巨灾债券

阅读英文原件。

“债券”一词具有某种魔力，因为其与我们生活的各个方面都息息相关。但是在商业世界中，债券作为金融工具，由政府和机构用于应对压力时期的资金困难。全世界的企业都从新冠肺炎大流行的影响中解脱出来的这个明显的时刻，是空前未有的。

当我的老朋友印度南部城市班加罗尔的独立分析师奈尔（T.B. Nair）告诉我巨灾债券在全球市场中逐渐普及时，引起了我对该题目的兴趣。奈尔提到了，巨灾债券正在成为一些国家确保大型跨国基础设施项目免于自然灾害的首选工具。他甚至继续提出，巨灾债券对印度克服旋风、洪水等造成的经济困难将大有帮助。

巨灾债券是结构性证券，可让保险单位将风险转移至资本投资者。换而言之，保险单位利用债券支付投资者承担重大风险，例如由于最大的地震和飓风造成的巨大损失。

据新华社报道，中国已经在加快建立巨灾保险制度的工作，以保护生命和财产免受地震，洪水和飓风等自然灾害的损失。2015年，中再集团在国际市场上发行了5,000万美元的巨灾债券，以投保国内地震造成的风险。中再集团声明，该发行通过利用资本市场帮助建立了巨灾保险的多元化风险分担机制。

ILS increasingly attractive in the face of COVID-19

ORIGINAL PUBLICATION HERE. INTELLIGENT INSURER OWN WEBSITE PUBLICATION HERE

As an asset class that is uncorrelated with financial markets, provides environmental, social and corporate governance (ESG) advantages and offers good returns in the current low interest environment, insurance-linked securities (ILS) are becoming increasingly attractive, Kirill Savrassov, an ILS and sovereign risk transfer specialist, told Baden-Baden Today.

ILS activity is gaining momentum because COVID-19 has highlighted the benefits of investing in an asset class that is uncorrelated with financial markets, said Savrassov.

“Another important point is that uncorrelation, together with current price increases in the reinsurance market, is making this asset class not only attractive but also reasonably priced, with good returns,” he said.

Governments and institutions bet big on CAT bonds

ORIGINAL PUBLICATION HERE. HARD PAPER VERSION HERE

There is something magical about the word bonds as it is closely linked with all facets of our life. But in the world of business, bonds are financial instruments that are used by governments and institutions to tide over funding difficulties in times of stress. And at no other time has it been more pronounced than at this juncture when businesses all over the world are reeling from the impact of the COVID-19 pandemic.

My interest in the topic was aroused when my old friend T.B.Nair, an independent analyst in the southern Indian city of Bengaluru, told me about how catastrophe bonds are gaining ground in the global marketplace. Nair told me that catastrophe bonds or CAT bonds are now becoming the instrument of choice for several countries to insure big transnational infrastructure projects from natural disasters. He even went on to suggest that CAT bonds would have been of great help for India to overcome the economic hardships arising from cyclones, floods etc.

Collateralized reinsurance to contract further, liquid ILS strategies to prosper: Aon

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The collateralized reinsurance market segment of insurance-linked securities (ILS) is expected to contract further, according to broker Aon, although it will likely remain the largest segment of ILS for the foreseeable future it seems.

In Aon Securities’ latest annual ILS market report, the capital markets unit of the global insurance and reinsurance broker explains that the collateralized reinsurance segment shrank by 6.5% in the first-half of 2020.

At the end of 2019 the collateralized reinsurance segment totalled $52.7 billion of the ILS market’s limit.

Congress should bring ILS issuance onshore to the U.S. – Syroka, Fermat

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The United States Congress has been urged to consider making it more attractive to issue insurance-linked securities (ILS) onshore, as this would make it easier for public and private entities in the country to access the capital markets for risk transfer, Joanna Syroka of Fermat Capital Management has said in testimony.

Speaking to the Select Committee on the Climate Crisis of the U.S. Congress earlier this month, Syroka explained that the generally offshore nature of the ILS market can make it challenging for certain types of sponsors to access the market and utilise instruments such as catastrophe bonds for insurance or reinsurance capacity.

She also explained that there are clear benefits for the United States Government were it to foster an onshore marketplace for insurance-linked securities (ILS).