Collateralized reinsurance renewals firmer than cat bonds or ILW’s

While the catastrophe bond market has been first to experience investor-demand and capacity driven softening, as spreads have increasingly tightened on primary issues over recent months, this isn’t yet reading across to the entire collateralized reinsurance market at the mid-year renewal season, we’re told.

2021 has seen a significant upwell in demand from investors for new catastrophe bond investments, which has driven strong execution and keen pricing to the benefit of sponsors, but resulted in year-on-year softening in that market.

As we’ve been explaining over recent weeks, spread tightening in the catastrophe bond issuance market has now driven multiples to levels last seen in 2019.

This softening of cat bond rates has also spilled over into the industry-loss warranty (ILW) market as well.

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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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City National Rochdale ILW fund lifts assets by 13%

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City National Rochdale’s largely industry loss warranty (ILW) focused mutual insurance-linked securities (ILS) investment fund increased its total net assets under management to $147.8 million by the end of October 2020, an increase of 13% in the quarter.

The City National Rochdale Select Strategies (CNRLX) fund is an interval style mutual fund with a focus on investments in industry loss warranty (ILW) reinsurance and retrocession contracts across global peak peril zones, as well as some regional U.S. ILW contracts. In addition, the fund also holds some investments in catastrophe bonds.

The fund accesses the returns of the ILW market and sources its risk-linked investments through a relationship with asset manager Neuberger Berman’s experienced ILW and index reinsurance investment team.

Interview to Investing in Private Markets, Europe 2020 Report: “Growth potential and resilience of ILS as an alternative capital”

PDF VERSION AVAILABLE HERE. FULL REPORT CAN BE DOWLOADED FOR FREE HERE.

Investing in private markets remains a prevalent strategy for institutional asset owners, and one that has demonstrated resilience even through the duration of the first quarter of this year as the Covid-19 pandemic spread across the globe. This is not to say private markets investment has been without issue, in the early months of the pandemic investing capital proved problematic in part because businesses were under financial pressure, and in part that funds were unable to access financing.

This report brings together UK and Wider Europe based Investment Actuaries, Heads of Insurance Asset Management, Investment Managers, Head of Investments and Senior Specialist. We explore regulatory improvements, investigate the due diligence that investing in private markets requires, dissect the information disadvantage, evaluate diversification as a key benefit, discuss the supply and demand imbalance, and address the increased role of climate positive and infrastructure related investments.

Turker Re launches Capital Solutions unit & Turkey quake ILW product

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Turker Re, a Lloyd’s broker with a significant insurance and reinsurance broking footprint in the Turkish marketplace and surrounding region, has launched a new product offering of a Turkey earthquake industry loss warranty (ILW) as the first under a new Capital Solutions unit.

The broker hopes to create a new market category for insurance, reinsurance and insurance-linked securities (ILS) companies, offering the Turkish earthquake ILW as an effective hedging tool for any companies with property exposure in the region.

Turker Re is aiming to cement a role for itself in helping the Turkey, MENA and Eastern Europe regions access the capital markets and insurance-linked securities (ILS) investors for reinsurance capacity and has launched a Turker Capital Solutions division, to focus on this opportunity.

COVID drove higher ILW demand. Positive trends expected for 2021: City National Rochdale

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Demand for reinsurance and retrocessional protection in the form of industry loss warranties (ILW’s) increased due to the COVID-19 pandemic and favourable market conditions are expected to persist, with a chance of higher demand again towards the end of this year, City National Rochdale has explained.

Reporting on its industry loss warranty (ILW) focused mutual insurance-linked securities (ILS) investment fund, investment manager City National Rochdale said that it sees a dynamic set of opportunities going forwards.

The City National Rochdale Select Strategies (CNRLX) is a mutual investment fund structured in the interval style, with a focus on investments in industry loss warranty (ILW) focused reinsurance and retrocession contracts across global peak peril zones as well as some regional U.S. ILW contracts, plus some investments into catastrophe bonds.

ILW demand rising, prices could soar for Japanese wind triggers

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Indicative pricing for Japanese wind exposed industry-loss warranty (ILW) backed retrocessional reinsurance protection have risen significantly in response to the now consecutive years of heavy Japan typhoon losses, as well as nervousness over where current loss estimates will be finalised.

At the same time, we’re told demand for ILW capacity covering U.S. perils is up significantly in advance of the January reinsurance renewals, as a number of major players look to all natural peril coverage in index trigger form as a way to augment their retrocession programs.

With the retro market again impacted by losses and trapped collateral in 2019, resulting in a capacity crunch, we understand that there is significant demand building for retro aggregate products that may not be satisfied at 1/1, given the expectation retro capacity could be limited.

Rochdale ILW fund puts capital to work, grows, but Irma dents returns

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Industry loss warranty (ILW) focused mutual insurance-linked securities (ILS) investment fund City National Rochdale Select Strategies (CNRLX), grew its net assets by 13% in the quarter to July 31st, but also saw fresh losses on two positions as hurricane Irma continued to develop.

The City National Rochdale Select Strategies Fund is a largely industry loss warranty (ILW) focused reinsurance and retrocession investment strategy focused on global peak peril zone and regional U.S. ILW contract investments.

It accesses this broad exposure through its relationship with the experienced ILW and index reinsurance investment team of asset manager Neuberger Berman, investing its assets in the cells of the Neuberger Berman ILS team’s NB Re Ltd. vehicle (previously named Iris Re) in order to source its risk-linked returns.

Rochdale ILW mutual fund continues net asset growth, rising 42%

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City National Rochdale Select Strategies (CNRLX), an industry loss warranty (ILW) focused mutual insurance-linked securities (ILS) investment fund, has continued to steadily grow its assets during its last reported quarter, although some loss impacts remain visible in the fund portfolio.

The City National Rochdale Select Strategies Fund ($CNRLX) ILW focused reinsurance and retrocession investment strategy is focused on peak peril and regional U.S. ILW contract investments.

It achieves this exposure through a relationship with the experienced ILW and index reinsurance investment team of Neuberger Berman, accessing risk by investing in cells of the Neuberger Berman ILS team’s NB Re Ltd. vehicle (previously named Iris Re).