China regulator calls on insurers to sponsor cat bonds in Hong Kong

China’s insurance regulator has called on insurers in the country to look to sponsor catastrophe bonds in Hong Kong as a way to access diversified sources of reinsurance capacity and offload peak natural catastrophe risks.

The China Banking and Insurance Regulatory Commission (CBIRC) said in a notice that domestic Chinese insurers sponsoring catastrophe bonds out of Hong Kong will be supporting its “closer” economic partnership agreement between the country and the Special Administrative Region.

As we’ve explained before, China’s government has been supportive of the development and introduction of catastrophe bond rules in Hong Kong and sees the special purpose reinsurance vehicles that can now be established there as a route for mainland Chinese insurers to access the capital markets for risk transfer and reinsurance purposes.

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Red Cross volcano cat bond issuance recognised for ESG credentials

The first parametric catastrophe bond covering pure volcanic eruption risk, which was brought to market by Replexus and Howden Capital Markets and for the Danish Red Cross has been recognised for its environmental, social and governance (ESG) credentials.

The Guernsey International Insurance Association (GIIA) has awarded its first environmental, social and governance (ESG) accreditation to an insurance entity and that entity is the Dunant Re IC Limited incorporated cell of Replexus ICC (Guernsey) Limited, the issuer of the volcano catastrophe bond earlier this year.

Operated and arranged by Cedric Edmonds, Founder and Director at Replexus ICC, while managed by Aon Insurance Managers (Guernsey), the vehicle has been recognised thanks to being the home to the first humanitarian catastrophe bond issuance.

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CEA’s risk transfer returns to $9.6bn. Short-term future needs less certain

The California Earthquake Authority (CEA) increased the size of its reinsurance and catastrophe bond risk transfer program by around 4.4% as of the end of July 2021, to reach almost $9.6 billion, but in the short-term future growth of the program seems less certain due to rising exposure and the cost of coverage.

That’s practically the same as the record size for the program, of also almost $9.6 billion of risk transfer that the CEA had in-force as of October 2020.

A relatively significant amount of catastrophe bond maturities shrank the CEA’s risk transfer and reinsurance program, back to $9.15 billion by December 2020, a figure it remained at through the end of last year.

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Mexico struck by M7.0 quake. World Bank cat bond appears safe

A magnitude 7.0 earthquake has struck the Pacific coast of Mexico close to the tourist heavy area of Acapulco. At this stage, it appears the World Bank facilitated IBRD / FONDEN 2020 parametric catastrophe bond that provides the Mexican government with earthquake insurance protection is safe from loss, but it is hard to be certain on the limited information available to us.

The $485 million 2020 issued IBRD / FONDEN catastrophe bond provides risk capital to support Mexico’s FONDEN natural disaster fund, via reinsurance agreements with Mexican government-owned insurer Agroasemex S.A.

Two tranches of the cat bond notes issued for the FONDEN 2020 deal are exposed to earthquake risks, providing $235 million of earthquake insurance protection, on a parametric trigger basis.

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CCRIF makes $2.4m parametric rainfall payout to Trinidad & Tobago

The CCRIF SPC (formerly known as the Caribbean Catastrophic Risk Insurance Facility), has made a US $2.4 million payout to Trinidad & Tobago after the Caribbean nations parametric excess rainfall insurance policy was triggered recently.

Including this latest payout, the CCRIF’s parametric disaster insurance policies have now paid out 54 times, amounting to $245 million paid out to 16 of its 23 members, with all payouts made within 14 days of the event occurring.

The Government of Trinidad and Tobago has received this latest payout after a heavy rainfall event that occurred during August 18-20, 2021 triggered its excess rainfall policies parametrics.

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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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Catastrophe bonds marked down on hurricane Ida threat

A number of catastrophe bonds have been marked down in end of month secondary market pricing sheets, with some of the anticipated names suffering declines of between 25% and 35% in value.

After hurricane Ida’s devastating landfall with 150 mph winds in Louisiana on Sunday it was always anticipated that there would be a mark-to-market reaction in catastrophe bonds.

The majority of insurance-linked securities (ILS) fund managers seem relatively comfortable that cat bond losses will be largely mark-to-market from the hurricane, as long as the industry loss remains in the current estimated range of around $15 billion to as high as $25 billion.

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Cat bond & ILW activity help drive PERILS-based transaction limit higher

An increase in use of PERILS industry loss triggers in industry-loss warranty (ILW) transactions focused on European windstorm risk, plus the buoyant catastrophe bond market, have helped to drive PERILS-based limits at risk up 11% to US $3.2 billion, as of the end of August.

PERILS AG, the Zurich-headquartered provide of catastrophe industry loss data and indices for use in reinsurance and insurance-linked securities (ILS) risk transfer transactions, has provided an update on the use of its data within risk transfer triggers.

Overall, PERILS data has been used in the placement of some US $20.2 billion of limit in reinsurance and retrocession transactions, largely capital markets backed, since 2010.

That represents 340 transactions, in catastrophe bond (ILS) and industry loss warranty (ILW) form.

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Timing more important than tenure for ILS investors: Lane at ILS Asia

While it’s not essential to invest in the insurance-linked securities (ILS) asset class for decades to achieve expected returns, it is important that investors time their entry into the space, according to Morton Lane, President, Lane Financial LLC and Director, MSFE Program, The University of Illinois in Urbana-Champaign.

As part of our virtual ILS Asia 2021 conference, held recently in association with our headline sponsor AM RE Syndicates Inc., Lane examined the past two decades of traditional 144A catastrophe bond issuance to determine if investors got what was expected.

His analysis, which can now be viewed in full on-demand, shows that in general, returns and losses were in-line with expectations.

However, this doesn’t necessarily mean you need to be in the asset class for two decades to achieve the expected returns.

FULL ORIGINAL PUBLICATION HERE