Climate change a factor in U.S. east coast hurricane threat: Researchers


Climate change is a factor in the intensity of hurricanes that threaten to strike the east coast of the United States, according to researchers who say that CO2 and greenhouse gases are helping to diminish the wind shear that can act as a barrier to storms.

Wind shear along the U.S. east coast has long been attributed to being a factor that can help to diminish the power of hurricanes as they approach the seaboard, known to disrupt the structure of tropical storms and as a result lower the chances of them making an intense landfall.

The presence or otherwise of wind shear can dictate the direction hurricanes travel in, their ability to organise and intensify, the intensity they can reach, their size and other factors of relevance to insurance, reinsurance and ILS market interests.

First PCS triggered Japan ILW brokered by Willis Re


Property Claim Services (PCS) industry loss data aggregation and index reporting services for non-marine catastrophe losses in Japan has already been used for an industry loss warranty (ILW).

We’ve learned that reinsurance broker Willis Re has become the first to structure and trade an industry loss triggered retrocessional risk transfer instrument using the still relatively new PCS Japan index as a trigger.

PCS launched its Japan focused industry loss data and index service in January of this year, as it responded to demand from its client base following the impacts of major catastrophe losses in 2018.

ILW market dynamics offer attractive investment potential


The industry loss warranty (ILW) market offers an attractive investment opportunity at this point in time, as market dynamics have reduced available capacity, meaning fewer coverage providers exist right now and ILW returns are on the rise.

Those ILS markets for which ILWs and other index-linked reinsurance and retrocession products are more of a mainstay though, this also means opportunity, as protection that triggers based on the industry-wide exposure remains in high demand.

As we’ve reported previously, ILW pricing has been on the rise in 2019 with indications suggesting that ILW capacity will be more costly for the core peak peril markets at the upcoming mid-year renewal.

Rochdale ILW mutual fund in 6.6% return, says ILW market “compelling”


The City National Rochdale Select Strategies Fund (CNRLX), an industry loss warranty (ILW) focused mutual insurance-linked securities (ILS) investment fund, managed a 6.6% annual return in the year to Jan 31st 2019, while its assets under management increased in the last quarter as well.

Given the focus of the City National Rochdale Select Strategies Fund ($CNRLX) ILW focused reinsurance and retrocession investment strategy on peak peril and regional U.S. ILW contract investments, facilitated by accessing the risk through the portfolio of the Neuberger Berman ILS management team’s NB Re Ltd. vehicle (the renamed Iris Re), this fund managed to avoid much impact from the 2018 catastrophe events.

When we last reported on the City National Rochdale mutual ILS fund it had reported net assets valued at $47.4 million as of October 31st 2018.

The fund grew around the January reinsurance renewals, when fresh capital will have been deployed into new ILW contract investments.

Alternative capital now 4% of $2 trillion non-life insurance market: Swiss Re


Alternative sources of capital now contributes at least 4% of the global non-life insurance and reinsurance market’s roughly U.S. $2 trillion capital base, according to Swiss Re.

The reinsurance firm puts the overall non-life global insurance capital base at $2 trillion, 80% (or $1.6 trillion) of which comes from primary insurers, 16% (or $320 billion) is from reinsurance firms, with the remaining 4% ($80 billion) coming from insurance-linked securities (ILS) funds, their investors and other alternative capital vehicles.

$80 billion seems rather low for an estimate of alternative capital in the industry at this time, which if you include some of the trapped capital is certainly closer to or above the $100 billion mark, according to our data, which puts alternative capital nearer to 5% of global non-life insurance and reinsurance capital.

ILW payouts on the cards after typhoon Jebi loss estimate rises


Typhoon Jebi has already become the loss creep story of 2019 so far, but it’s set to become an even higher profile case as a rising industry loss estimate for the storm means it’s now expected that a number of industry loss warranty (ILW) contracts will payout.

We understand that one of the third-party catastrophe loss estimates used as a determining input source for ILW triggers covering Japan typhoon and Japanese all-natural-peril contracts has now been updated, setting up losses for some.

We’re told there is likely to be up to $100 million, perhaps a little more, of ILW capacity that may now payout on the increase of the typhoon Jebi loss estimate.

The estimate in question is the latest from Swiss Re’s sigma, which has now pegged Jebi’s insurance and reinsurance industry loss at $9.77 billion.

We’re told this will trigger payouts of any Japan typhoon ILW’s that attach at a $7.5 billion Japan typhoon industry loss, of which we’re told there are a handful, perhaps as much as the $100 million of limit mentioned above.

ILW prices rise for Florida wind triggers as renewal approaches


Indicative pricing for certain types of industry-loss warranty (ILW) backed retrocessional reinsurance protection has been on the rise, with Florida wind and as a result U.S. all natural perils seeing the largest increases of in advance of the mid-year renewals.

In 2019 there has been a scarcity of capacity for certain retrocessional reinsurance protection products, resulting in steeply rising prices.

The industry-loss warranty (ILW) market has been equally affected, with some sources telling us that ILW activity ground to a halt earlier this year while pricing adjusted.

It’s clear that the lack of retro capacity, particularly for peak U.S. wind and all-natural-perils, as well as at some more remote layers in the tower, has impacted ILW pricing as well, with some of these industry loss triggers seeing their prices rise in recent weeks.

We’ve analysed sources of ILW pricing and the majority of brokers have raised their pricing for Florida wind and hurricane triggers across the range of industry loss levels.

Up to 20% ILS rate increases as hard market ensues: Lane Financial


The Lane Financial LLC synthetic insurance-linked securities (ILS) rate-on-line index rose 15% during the final quarter of the year as ILS rates look to have entered hard market territory, while its analysis indicates ILS rates could rise up to 20%.

Based on ILS and catastrophe bond market pricing as of mid-December, the Lane Financial team conclude that “we are once again within hard market territory” explaining that “Our numbers indicate a 10 – 20% increase in rates.”

The reason for this is of course the recent loss experience of the ILS market, after the realised impacts of 2017 hurricanes and wildfires, the ongoing loss creep and increasing impact to aggregate structures from those same events, and now the added burden of fresh losses from 2018 catastrophes as well.

Miller completes acquisition of ILW broker Alston Gayler (AG)


Miller Insurance Services LLP, the London broker majority owned by Willis Towers Watson (WTW), has completed its acquisition of Lloyd’s accredited and London headquartered insurance and reinsurance broker Alston Gayler (AG).

Alston Gayler has a recognised ILW broking practice specialty and experience broking to collateralised reinsurance markets as a result and is well-known to the insurance-linked securities (ILS) fund world, placing business with ILS funds on an industry-loss and collateralised indemnity reinsurance or retrocession basis.

The acquisition was first announced back in October, although terms of the deal were not disclosed.

ILS collateral rollover rule formalised at 30 days by Guernsey regulator


Insurance-linked securities (ILS) cells established in Guernsey will benefit from formalised collateral rollover provisions, including confirmation of a 30-day grace period at the start of a transaction where an ILS cell would not be considered in breach of its fully-funded requirements.

The Guernsey Financial Services Commission (GFSC) has clarified and formalised certain issues relating to collateral rollover and the authorisation process for ILS cells, following talks held with the Guernsey International Insurance Association (GIIA).

The issue of collateral rollover at the beginning of a transaction or its renewal has long been highlighted as a potential concern for the ILS market.