Usual suspects look to fill fronting gap left by acquisition of TMR

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The gap in terms of fronting services for collateralised and ILS markets left by the acquisition of Tokio Millennium Re by Bermudian reinsurer RenaissanceRe is being filled we’re told, as the usual suspects look to take on any of that business they find attractive.

We’ve been told that a number of players have been out looking to scoop up some of the collateralised reinsurance fronting work that Tokio Millennium Re (TMR) had been servicing for insurance-linked securities (ILS) funds and investors, although the two main providers of this service, Allianz and Hannover Re, are expected to take most of the attractive opportunities we understand.

ILW pricing stays relatively flat since recent catastrophe losses

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Pricing for industry-loss warranty (ILW) backed retrocessional reinsurance protection has not shifted significantly since the aggregation of recent catastrophe loss events, with brokers still pitching capacity at the same rates as prior to the wildfires, sources have told us.

Since the California wildfires are now assumed to be a $15 billion plus industry loss and other events such as Japanese typhoon Jebi and hurricane Michael are expected to see their costs escalate, the focus for the renewals has moved to one of expected rate stability (at least) and the potential for price increases.

But so far our sources tell us that industry-loss warranty (ILW) pricing has remained flat through the recent weeks of market disruption (perhaps dislocation) and that there are transactions being marketed at flat levels, while another broker told us that there is flat pricing on some firm quotes for the renewals as well.

Aggregate ILS returns questioned after recent losses

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The returns on aggregate insurance-linked securities (ILS), including catastrophe bonds, are being questioned by some investors, following the significant number of catastrophe loss events that have qualified under some contract terms in the last two years.

Sources said that investors are set to demand a premium for renewing some aggregate ILS arrangements and that the market should expect that any aggregate catastrophe bonds will likely see their pricing increase in 2019.

There is some nervousness among the ILS fund manager and investor base that aggregate catastrophe bond and collateralised reinsurance coverage may have been given away too cheaply in recent years, leading some to call for increases.

ILW triggers on watch for typhoon Jebi, hurricane Michael & wildfire losses

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The industry loss warranty (ILW) market is waiting nervously for confirmed estimates of industry losses to emerge for a number of recent catastrophe events around the globe, with certain trigger points on-watch and further ILW losses possible in the coming weeks.

The ILW market, which largely provides retrocessional forms of reinsurance that trigger and payout based on estimates of industry impacts from catastrophes, has faced its share of losses ever since the major hurricanes struck in 2017.

Loss creep from hurricane Irma also delivered a blow to some ILW providers, tipping a few more positions into loss and now the ILW capacity backers are nervously watching a few specific trigger points for further losses in weeks to come.

ILW volumes rise in 2018, price softens despite capacity shortages: Aon Securities

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Industry loss warranty (ILW) trading volumes have risen in 2018 so far, with protection buyers showing renewed interest in the industry loss trigger based product, but while volumes rose Aon Securities has also noted that, despite capacity shortages at times, ILW prices are tending to soften.

Year over year capacity has been in shortage at times for the majority of ILW products, Aon Securities explains.

However, reinsurance firms are becoming very flexible when it comes to the ILW product and Aon notes they were “willing to entertain lower trigger levels in order to raise their market profile and to differentiate themselves.”

Durability of ILS structures no longer in question: Tim Faries, Appleby

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Any doubts surrounding the durability of alternative structures have largely been put to bed after ILS’ response to 2017 events. And while there’s been no surprises so far in 2018, the ongoing maturation and evolution of the sector suggests investors won’t be completely decimated by losses.

This is according to Tim Faries, Bermuda Managing Partner of offshore law firm Appleby, who met with Artemis at the annual meeting of the reinsurance industry in Monte Carlo recently to discuss trends in the catastrophe bond and broader insurance-linked securities (ILS) marketplace.

Collateralized reinsurance market shows no signs of slowing down

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Collateralized reinsurance market growth shows no signs of slowing down, according to rating agency S&P, as the “exceptional growth” exhibited by this form of third-party capital looks set to continue, in particular thanks to the ease of uptake for ceding companies.

Collateralized reinsurance can be a much simpler entry point for ceding companies, into accessing the capital markets backed, insurance-linked securities (ILS) world of reinsurance and retrocessional protection.

For buyers of protection new to ILS, collateralized reinsurance poses fewer challenges or hurdles to adopt as a component of a reinsurance tower, compared to the structuring and issuance of catastrophe bonds, for example.

UNDP Disaster risk reduction financing regional conference

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Disasters and the associated economic shocks are a significant threat to human life and personal wellbeing. While the costs have always been significant, disasters are increasingly more expensive.  Between 2005-2014, the Eastern Europe and Central Asia region alone faced 314 disasters, resulting in more than 60,000 people killed, 11 million people affected and US$25 billion in damages.

A lack of resilience to disasters (which increasingly have massive consequential impacts well beyond the direct event) in both developed and developing economies is an increasing threat to economic growth and global security. Therefore, investors seeking to mitigate these risks need to prioritize funding for development that targets resilience and sustainability provided by better infrastructure.

More ILW’s to pay out on latest hurricane Irma industry loss increase

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A number of industry-loss warranty (ILW) contracts providing retrocessional reinsurance are set to pay out after the latest updates to third-party data providers estimates of insurance industry losses caused by last year’s hurricane Irma.

At the beginning of July the industry loss estimate for hurricane Irma passed another key ILW trigger point we understand, resulting in a further hit to traditional and alternative or ILS fund capacity providers to some affected transactions.

We’re told that two triggers have actually been breached, a new high for hurricane Irma losses in Florida alone, as well as a new total across the U.S. and Caribbean, both of which could affect certain industry loss trigger reinsurance and retro contracts, including ILW’s.