Ledger Investing launches Nanorock casualty ILS fund

Ledger Investing has launched its first insurance-linked securities (ILS) fund, a casualty risk focused strategy backed by a single investor, and an ILS management unit, Ledger ILS Managers LLC. While the firm plans a $300 million co-mingled casualty ILS fund strategy as well.

Using its own technology platform, a marketplace for connecting capital market investor funding with insurance and reinsurance risks, Ledger Investing has announced the closing of Nanorock Fund Ltd.

The Nanorock Fund will invest primarily in casualty insurance risks through the Ledger Connect platform, its proprietary tech platform, with a range of longer-tailed liability driven lines in scope.

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UNDP launches Insurance & Risk Finance Facility, ILS support anticipated

The United Nations Development Programme (UNDP) has today launched the Insurance and Risk Finance Facility (IRFF), a new initiative that aims to build financial resilience and bridge a $1.4 trillion global health, mortality, and disaster protection gap, with support from the insurance-linked securities (ILS) market expected in future.

Importantly, this Insurance and Risk Finance Facility (IRFF) will work to channel risk to private insurance, reinsurance and capital markets over-time, and aims to significantly increase the role of insurance and risk-financing in development.

The German Government has contributed €35 million in funding to the Facility, which will be used for technical work and capacity building on the ground, as well as for the development of new insurance products.

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ILS capital returns to previous record level of $97bn: Aon

Helped by a record period of catastrophe bond issuance in the first-half of 2021, alternative capital levels in reinsurance, largely in insurance-linked securities (ILS) formats, have now returned to their previous record year-end level of $97 billion, according to Aon.

As of the half-way point of 2021, Aon’s Reinsurance Solutions counts total global reinsurance capital as having reached a new high of $660 billion.

That’s increased by just over 1.5% since the end of 2020, as additional capital raises, positive performance and retained earnings, as well as ILS market expansion, drove the global reinsurance capital base higher again.

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ILS fund returns dented by European floods in July: ILS Advisers

The average return of the insurance-linked securities (ILS) fund market was dented by the European flooding in July 2021, with some funds focused on private ILS and collateralized reinsurance contracts suffering losses from the event.

For the month of July 2021, the average ILS fund return was 0.20%, according to the Eurekahedge ILS Advisers Index.

That was less than half the long-term average ILS fund for the month of July, which stands at 0.59%.

In fact, this July was the worst performance ever for that month since the ILS Advisers Index began tracking ILS fund performance.

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Hurricane Ida insured wind & storm surge losses seen at up to $25bn by AIR

AIR Worldwide has estimated that insurance and reinsurance industry losses to onshore property resulting from the wind and storm surge impacts of Hurricane Ida will be between $17 billion and $25 billion.

This estimate from AIR compares to CoreLogic’s industry loss range of $14 billion to $21 billion, and Karen Clark & Company’s re/insured loss estimate of close to $18 billion.

The catastrophe risk modeller’s insured loss estimate includes physical damage to property (residential, commercial, industrial and auto), both structures and their contents from winds, wind-borne debris, storm surge, and the impact of demand surge. But does not include hurricane precipitation-induced flood losses.

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NFIP cat bonds & reinsurance in focus as Ida’s remnants flood New York

The remnants of hurricane Ida have continued to drop torrential rain along its path north east and its slow pace and heavy downpours have now flooded parts of New York, all of which is heightening the risk posed to FEMA’s catastrophe bonds and reinsurance tower for the National Flood Insurance Program.

As we explained yesterday in our analysis of catastrophe bonds that have seen secondary market price declines in the wake of hurricane Ida’s landfall and impacts in Louisiana and the surrounding region, the FloodSmart Re catastrophe bonds are among those considered potentially exposed.

The US Federal Emergency Management Agency (FEMA) has been procuring reinsurance for its National Flood Insurance Program (NFIP) for a few years now, both from traditional reinsurers and the capital markets using catastrophe bonds.

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Retailers need a wholesaler that understands capital markets (ILS): Amwins Sloop

Retail insurance market players need to work with wholesalers that understand insurance-linked securities (ILS), Amwins COO Ben Sloop has explained, suggesting that the access this can give them to efficient sources of reinsurance capital is vital.

Amwins recently formally launched a new insurance-linked securities (ILS) partnership with Bermuda based ILS fund manager Integral Integral ILS Ltd.

Working alongside specialty insurance player Core Specialty, which will be the policy issuer, certain Amwins MGA risks are set to have their catastrophe risks assumed by funds under the management of Integral ILS.

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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.

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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.

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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.

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