Industry-loss warranty (ILW) market softens YoY as capacity rises

Following conversations with a number of market sources, it seems that the market for industry-loss warranty (ILW) protection has softened year-on-year, following on the heels of the catastrophe bond market as capacity turns its attention to ILW’s in the run up to the renewals.

Just the other day we explained that indicative pricing for industry-loss warranties (ILW’s) has jumped higher year-on-year, but it turns out this is just broker pricing sheets catching up to more realistic pricing levels after many had been indicating rates that were far too low a year ago.

That caused a number of contacts in the ILW capacity providing and broking market to reach out, to provide some colour on where pricing actually sits in 2021.

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Florida ILW price indications up as much as 50% year-on-year

With the Florida reinsurance renewals fast approaching, it’s interesting to learn that indicative pricing for industry-loss warranty (ILW) protection covering hurricanes affecting the state is up significantly year-on-year, but actual market pricing may be flat or even down. Please read our update at the foot of this article.

The market for typically retrocessional reinsurance protection structured in industry loss warranty (ILW) form has been one of the areas that saw a contraction of available capacity and then hardening over the last few years, but the hardening actually seems to have been more significant through the second half of 2020 and into 2021 than it had been after the loss heavy Florida hurricane year’s of 2017 and 2018.

The ILW market has been cited as one area of reinsurance where attractive return opportunities exist this year and broker pricing sheets seen by Artemis suggest those looking to back ILW’s with their capital are likely to secure better rates than a year ago.

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Abu Dhabi Investment Authority exploring reinsurance market entry

The Abu Dhabi Investment Authority (ADIA), a sovereign wealth investment fund owned by the Emirate of Abu Dhabi and tasked with investing funds on behalf of the Government of the Emirate, is looking to expand its activities in reinsurance with its own carrier and also insurance-linked securities (ILS), we’re told.

Sources have told us that the Abu Dhabi Investment Authority (ADIA) has been running a beauty parade of reinsurance brokers and advisories in recent months, as the investor looks to identify the most appropriate points of entry and structures to access a more meaningful source of direct reinsurance linked returns, as it builds out its initiatives across the space.

We’re told the new interest and broker selection is coming from the private equity arm of the Abu Dhabi Investment Authority (ADIA), as it looks to enter reinsurance, likely with a rated carrier approach, at some stage in 2021 or 2022.

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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.

ILS Capital gives pension fund 11.4% return

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ILS Capital Management Ltd, the Bermudian-based manager of insurance-linked securities investments, delivered a double-digit return to a major investor last year.

Bob Jacksha, chief investment officer of the New Mexico Educational Retirement Board, a $12.9 billion pension fund, said their investment with the Bermudian fund manager produced a return of 11.4 per cent in 2018.

ILS Capital Management was founded by Don Kramer, the reinsurance veteran who is the company’s chairman.

Spinnaker’s growth ambitions to receive support from ILS market

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Program and fronting service specialist, Spinnaker Insurance Company, expects further organic growth as it continues to scale its operations with the support of the insurance-linked securities (ILS) space, according to General Counsel, Nicholas Scott and Senior Vice President (SVP), Adam Tyburski.

Launched in 2015 by ex-Arch Re Ingrey family members, the start-up focuses on writing property and casualty exposed programs from U.S. homeowners and specialty business lines.

The start-up has continued to grow since its inception, and in an interview with Artemis, Spinnaker’s Scott explained that the firm’s investments in long-term, sustainable partnerships, means much of its growth is derived from existing programs, including new programs with current partners.

Collateralized reinsurance worked as designed & advertised: John Forney, CEO UPC

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Collateralized reinsurance structures and markets worked exactly as designed and advertised, which gives United Insurance Holdings (UPC Insurance) the confidence to execute on its strategy, according to CEO John Forney.

United (UPC) is a major user of collateralized reinsurance capacity, from insurance-linked securities (ILS) funds as well as from catastrophe bond investors.

The expansive insurer, which began as a Florida property only specialist but has been expanding more broadly nationwide in the United States, has grown its use of alternative capital along with its expansion and as a result the ILS market is a key partner for the company now.

TWIA targets at least $2.1bn of reinsurance & cat bonds for 2019

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The Texas Windstorm Insurance Association (TWIA) will aim to secure at least $2.1 billion of protection from the global reinsurance and insurance-linked securities (ILS) market for the 2019 hurricane season, taking its total claims-paying capacity to at least $4.2 billion.

TWIA’s Board this week approved its staff to go to market and renew or purchase afresh whatever reinsurance and catastrophe bond coverage may be required to ensure it meets its target of coverage for a 1-in-100 year loss.

TWIA is the largely coastal residual market property insurer in the state of Texas, providing insurance to its clients in some of the most hurricane exposed regions of the United States.

ILS will enhance institutional client portfolios: Neuberger Berman

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The addition of insurance-linked securities (ILS) investment expertise, through the recently announced acquisition of the Cartesian Re ILS operations, is expected to “enhance” the institutional client portfolios offered by asset manager Neuberger Berman Group.

Neuberger Berman, a private asset manager with around $315 billion of assets, announced that it has acquired the insurance-linked securities (ILS) and collateralized reinsurance investment management entities of the Cartesian Capital Group last week.

The deal sees the Cartesian Re ILS asset management unit of Cartesian Capital and the units reinsurance and segregated accounts vehicle Iris Re acquired by Neuberger Berman for an undisclosed fee.

The new ILS investment management unit within Neuberger Berman will be called NB Insurance-Linked Strategies, while its affiliated Bermuda reinsurance vehicle Iris Re is being renamed to NB Reinsurance Ltd. In addition, former owner Cartesian Capital Group is set to work with Neuberger Berman as it delivers ILS services and investment opportunities globally.