Indonesia launches US $500m risk pooling facility. Risk transfer a goal

The government of Indonesia has launched a new disaster risk pooling facility that will initially have more than US $500 million of capacity available to help pay for the economic costs of natural catastrophes and severe weather events, but with a future goal of transferring some or all of the risk to private insurance or capital market sources.

Indonesia’s move to create a disaster risk pool comes after a number of year’s of work with the World Bank and other organisations to better understand its exposure to disaster risks and the costs it suffers from them.

It’s estimated that Indonesia suffers somewhere between US $1.3 billion and US $1.5 billion of economic damages from natural disasters on average each year.


APAC reinsurers to continue targeting ILS: Fitch

Analysts at Fitch Ratings expect that reinsurers in the Asia Pacific market will continue to adopt alternative capital as a funding source through the insurance-linked securities (ILS) market.

The rating agency forecasts additional issuance of catastrophe bonds in the coming months after the seven that were issued using Singapore-domiciled vehicles up to July 2021.

Potential catastrophe bond issuers will likely be from countries whose reinsurers have lower profitability such as Japan and China given the urgency to lower the cost of capital. On the other hand, reinsurers in Indonesia and Korea may enter the market later.


Asia’s cat bond & insurance-linked securities market to expand: Fitch

We should expect accelerating catastrophe bond issuance from Asia’s ILS domiciles, more cat bond and insurance-linked securities sponsors to emerge from the region and a gradual increase in use of alternative reinsurance capital in Asia Pacific, according to Fitch Ratings.

The rating agency explained in a recent report that it anticipates continued momentum in insurance-linked securities (ILS) across Asia.

With a number of catastrophe bonds issued out of Singapore in the first-half of the year, all of which are listed in our extensive Deal Directory, Fitch expects this flow of new cat bond issuance will continue from the domicile, which is now becoming increasingly established.


Bloomberg: Cat-Bond Market Rises to Record With $8.5 Billion of Issuance

Catastrophe bonds broke a record during the first half of the year with about $8.5 billion of new securities issued, according to a report from Swiss Re AG.

The insurance-linked securities market could end up with more than $10 billion in issuance for the full year, the reinsurer said in a report released Wednesday. The market was helped in part by older securities that matured and gave investors more money to put back to work, as well as demand from those seeking to diversify risks, according to Swiss Re’s Judy Klugman.

The performance through June of the catastrophe-bond market, which can help provide capital for risks from natural disasters like hurricanes, topped a previous half-year record of $8.4 billion of issuances in 2017. It has grown in popularity in recent years as investors hunt for unique assets. Some of the bonds issued during the first half half covered risks such as California earthquakes as well as windstorms and wildfires.


Cat bond market can grow to $50bn, pandemic risk & ESG are drivers: Swiss Re

After a particularly busy first-half of 2021 for catastrophe bond issuance, global reinsurance firm Swiss Re’s Capital Markets unit believes that a $50 billion market is possible by 2025 and that two drivers of further insurance-linked securities (ILS) market growth could be pandemic risk and ESG.

In its latest Insurance-Linked Securities Market Insights report, Swiss Re Capital Markets highlights the robust issuance seen in H1 2021.

“With new capital raised, many primary new issues were heavily oversubscribed and upsized, while also testing lower spread levels than originally announced,” the company explained on the prior year.


BlackRock launches ESG fund with cat bonds a targeted asset

Investor demand for environmental, social and governance (ESG) appropriate investment opportunities and asset classes is expected to become a key driver for the insurance-linked securities (ILS) market going forwards and a new fund launch from giant asset manager BlackRock only serves to reinforce this belief.

While there are still very few insurance-linked securities (ILS) or catastrophe bonds that are considered to be fully ESG aligned, this is expected to increase over time.

However, ILS and catastrophe bonds in particular, are seen as having inherent ESG related qualities.

They are vehicles for provision of disaster risk and recovery financing, are seen to protect society against the environmental impacts of weather and natural disaster events, and they are issued out of a highly regulated marketplace with strong governance already in-place.


Cat bond fund size matters, but bigger isn’t always better: Plenum’s Schmelzer

When it comes to constructing a catastrophe bond fund it is important to consider market limitations, in terms of size and the availability of diversification. Given the cat bond market is only so large, there is a point at which growth in fund assets can come at the expense of returns, according to Plenum Investments Partner and Senior Portfolio Manager, Dirk Schmelzer.

This means finding the optimal size for a catastrophe bond fund is important, if you want to benefit from portfolio construction related alpha and not simply become another market tracking fund.

Diversification is one of the issues, given the limited size of the catastrophe bond market and the now growing number of fund managers and investors targeting it.


Timing more important than tenure for ILS investors: Lane at ILS Asia

While it’s not essential to invest in the insurance-linked securities (ILS) asset class for decades to achieve expected returns, it is important that investors time their entry into the space, according to Morton Lane, President, Lane Financial LLC and Director, MSFE Program, The University of Illinois in Urbana-Champaign.

As part of our virtual ILS Asia 2021 conference, held recently in association with our headline sponsor AM RE Syndicates Inc., Lane examined the past two decades of traditional 144A catastrophe bond issuance to determine if investors got what was expected.

His analysis, which can now be viewed in full on-demand, shows that in general, returns and losses were in-line with expectations.

However, this doesn’t necessarily mean you need to be in the asset class for two decades to achieve the expected returns.


Agricultural Impacts of Flooding in Henan, China

The record rainfall that hit the province of Henan in China the week of July 19 caused extensive flooding that led to mass displacement and casualties. Some reports provided estimated impacts to the agricultural sector.  Here, we put those estimates into context for the agricultural insurance market in China.


Российские аграрии потеряли миллиарды из-за погоды

В российских регионах, в которых был объявлен режим чрезвычайной ситуации (ЧС) из-за потерь в сельском хозяйстве, было застраховано более полутора миллионов гектаров посевов, пишет «Коммерсантъ» со ссылкой на данные Национального союза агростраховщиков (НСА). Всего с ЧС на фоне экстремальных погодных условий, засух и других природных бедствий к моменту подготовки оценок столкнулись 13 субъектов, в девяти из них аграрии заключали договоры на страхование урожая.

С начала года по 11 августа представители сельского хозяйства заявили об ущербе в 19 миллиардов рублей. Однако, как объяснил глава НСА Корней Биждов, сумма может быть меньше. «Практика предыдущих лет показывает, что по мере подтверждения экспертизой оценка уменьшается приблизительно в два раза», — рассказал он. Комиссии по ЧС, которые в регионах создают местные минсельхозы, только начали свою работу. Министерство сельского хозяйства России получит точные подтвержденные сведения к осени.

Глава страхового брокера «Ростеха» — «РТ-Страхование» Николай Галушин при этом пояснил, что в сельском хозяйстве страхуется не более 10 процентов посевов. Общие убытки российских страховщиков от чрезвычайных ситуаций в 2021 году он оценивает в размере до трех миллиардов рублей. В сегменте страхования имущества физических и юридических лиц страховщики вряд ли потеряют из-за ЧС существенные деньги. Скорее всего, больше всего выплат придется на юридические лица, например, из-за ущерба железнодорожным объектам или имуществу энергетиков.