Lloyd’s calls for re/insurance, investor & Gov work on disaster risk financing

The Lloyd’s insurance and reinsurance market has put out a call for a coordinated effort to enhance the disaster resilience of developing and developed economies, by bringing together the re/insurance sector with investors and governments to create new financial solutions.

Lloyd’s launched a new report today called Insuring a sustainable, greener future, which it says “sets out how the insurance industry will partner with critical industries to support and accelerate the transition to a low carbon economy.”

The report highlights ambitions to put the global insurance and reinsurance industry’s roughly $30 trillion of capital to work in green, climate-positive and resilience focused investment, risk transfer and innovation.


Red Cross targets cat bonds for nature-based, humanitarian, resilience financing

The Red Cross, working alongside insurance-linked securities (ILS) risk securitisation facilitator and risk transfer consultancy Replexus Group, is developing a solution to promote nature-based solutions to disaster risk, financed partly through the use of catastrophe bonds, as well as other humanitarian and development scenarios.

Recently, the Danish Red Cross successfully delivered the world’s very first catastrophe bond covering pure volcanic eruption risk.

The organisations innovative finance team have been exploring other use-cases for catastrophe bonds and insurance-linked securities (ILS), around areas where it feels supporting capacity from the capital markets can both take on exposure to natural disasters, while helping its own funding work harder and do more.


Insured losses from China’s Henan floods could exceed $1.25bn, says Fitch

The recent severe flooding in China’s Henan province is expected to suppress underwriting margins for the China non-life insurance and reinsurance industry in 2021, with total industry losses expected to exceed US $1.25 billion, according to Fitch Ratings.

At this level of insurance and reinsurance industry loss, it would account for more than 0.7% of the market’s entire premium base, the rating agency has explained.

As we explained last week, Henan in east-central China experienced torrential rainfall since July 16th, triggering devastating floods and landslides.

The equivalent of a year’s average rain fell for three consecutive days in Zhengzhou, the provincial capital, damaging thousands of properties and motor vehicles in the region.


FEMA plans new NFIP flood cat bond, seeks reinsurance transformer

The U.S. Federal Emergency Management Agency (FEMA) is planning to sponsor another FloodSmart Re catastrophe bond to provide flood reinsurance to the National Flood Insurance Program (NFIP) and is seeking proposals from potential reinsurance transformer partners.

FEMA has secured $1.775 billion of collateralized reinsurance from the capital markets across four catastrophe bonds issued under the FloodSmart Re Ltd. program since 2018.

It’s most recent and fourth cat bond deal, a $575 million FloodSmart Re Ltd. (Series 2021-1) issued in February 2021, will more than replace its soon to mature $500 million transaction from 2018, the FloodSmart Re 2018-1 cat bond.


Cat bond not a “handout”, Jamaica aims to renew by itself: Minister

The fact foreign donors paid for the premiums associated with Jamaica’s first catastrophe bond does not mean it was a “handout” the country’s Minister of Finance has explained.

Jamaica’s first catastrophe bond, the recently placed IBRD CAR 130 transaction, was priced and saw the Caribbean island nation securing the upsized target of $185 million of coverage last week.

Helping Jamaica to access disaster insurance from the capital markets were the World Bank and its Treasury, which facilitated the transaction and worked on the deal for around three years.


Hong Kong’s ILS regime must show its competitiveness: ILS Asia 2021

While the Hong Kong regulator’s insurance-linked securities (ILS) grant scheme is expected to attract sponsors to the region, the new regime must show its competitiveness against existing and established ILS domiciles, say industry experts.

Hong Kong’s emergence as a new Asian domicile for the issuance of catastrophe bond and ILS transactions provides sponsors with another choice.

To help the new ILS platform gain momentum, issuers are able to take advantage of a grant scheme designed to cover some of the issuance costs of a catastrophe bond.


Jamaica’s cat bond priced at upsized $185m, ILS funds take 66% of notes

Jamaica’s first catastrophe bond, the IBRD CAR 130 transaction, has now been successfully priced and the Caribbean island nation has secured the upsized target of $185 million of coverage, with pricing closer to the upper-end of guidance.

Dedicated insurance-linked securities (ILS) investment funds took the lions share of the cat bond notes on offer, absorbing 66% of the arrangement, the World Bank reported.

As we reported recently here, the first catastrophe bond for Jamaica looked set to increase a little in size, from the original offering of $175 million of notes.


Strong need for mainland China to tap the capital markets: ILS Asia 2021

Mr. Simon Lam, Executive Director, General Business at the Hong Kong Insurance Authority, expects the region’s new ILS regime to “hit the ground running” as mainland China’s insurance market growth continues apace.

With the issuance of Greater Bay Re Ltd., sponsored by China Re, expected soon as the first catastrophe bond to be issued out of Hong Kong, the insurance-linked securities (ILS) universe has a new domicile to choose from.

Like Singapore, Hong Kong’s regime offers a grant scheme which covers some of the issuance costs of cat bond transactions, something which has helped to attract sponsors to Singapore’s platform and which is seen as important for new domiciles to gain traction.


Jamaica’s World Bank catastrophe bond could upsize to $185m

The first catastrophe bond for Jamaica, which as we were first to report ten days ago launched as a $175 million IBRD CAR 130 transaction with the support of the World Bank, is now said by our sources to have a chance of closing a little larger, at $185 million in size.

The $175 million or greater catastrophe bond seeks a capital markets backed source of named tropical storm and hurricane disaster insurance protection for the government of Jamaica, on a parametric trigger basis.

As we’d also reported recently, important grant agreements had been signed and as a result the first catastrophe bond for Jamaica was expected imminently.

That proved correct, when our sources told us the deal had been launched to investors ten days ago and we reported on the structure being offered and the protection it will afford to Jamaica’s government.


Cat bonds still attractive vs corporate credit despite spread tightening: K2

While catastrophe bond and insurance-linked security (ILS) spreads have tightened during the second-quarter of 2021, hedge fund specialist manager K2 Advisors believes that they remain attractive relative to corporate credit and are a strategy investors should be focusing on.

Given the still uncertain world, as the recovery from the pandemic continues but challenges related to that and central bank policy remain, the hedge fund focused asset manager, which is a unit of investment firm Franklin Templeton, believes investors should be looking to focus their hedge fund investments on alpha generating non-directional strategies.

One of these is insurance-linked securities (ILS), an area that Franklin Templeton and K2 Advisors provide expertise and now also managed fund strategies, having launched its own UCITS catastrophe bond recently.