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The Reinsurance Evolution Continues: Executive Summary


During the past twelve months, capital has continued to flow into the reinsurance markets in the form of both insurance-linked securities (ILS) and collateralized reinsurance transactions. This report examines the growth in the ILS market during the past year and some of the important evolutionary elements of catastrophe bond structure and risk transfer. We also explore how the use of capital markets-based capacity provides cost savings for public entities by helping them build surplus, reduce public debt and limit the risk that natural perils can pose to the state’s balance sheet. As collateralized markets continue to increase in importance as an alternative to both traditional reinsurance and ILS, Guy Carpenter has taken an active role in analyzing counterparty risk and developing specific structures and strategies to manage this risk. This report also provides an overview of the manner in which Guy Carpenter assists its clients in managing counterparty risk and limiting credit exposure.


Swiss pensions look to ILS as alternative asset, but regulation hinders


Switzerland-based Pensionskassen, or pension funds, are increasingly looking to alternative and risk-based investment strategies and as a result the insurance-linked securities (ILS) asset class is gaining popularity, according to reports.

A recent article by Investment & Pensions Europe (I&PE) explores changes in the risk allocation strategies of the Swiss pension sector, stating that firms are increasingly looking to alternative risk-based strategies to bolster their portfolios with diversified sources of return from risk-based assets, and achieve higher yields.

Investing in Alternatives, Europe – report by Clear Path Analysis


Historically, pension funds and insurers have been hesitant to allocate to alternative investments due to their premium fees. However, greater understanding over recent years of their uncorrelated nature with those of the stock and bond markets and their costs and consequential higher returns, means they are now at the forefront of investors’ minds and are an increasingly important asset class in a portfolio.

The Investing in Alternatives, Europe report will bring together European based pension plans, insurers, endowment funds, foundations and private banking and wealth groups to explore the rationale for alternative asset allocation, selecting the most appropriate strategy for your objectives as well as the role of alternatives in DC pension schemes.

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Hedge fund reinsurers: 
are the rewards worth the risk?


The plethora of new hedge fund-backed reinsurers that continue to be launched will carve out a niche in the industry—but perhaps not at the expense of the big, global reinsurers, argues Taoufik Gharib from Standard & Poor’s Insurance Ratings.

During the past few years, the hedge fund reinsurer (HFR) model has emerged in Bermuda and the Cayman Islands. HFRs are now competing with traditional reinsurers and alternative capital (also referred to as convergence capacity, third-party capital, and collateralised reinsurance) for business in what is becoming a soft reinsurance market. The multi-billion dollar question is: how viable and sustainable is the new HFR model?


Pension funds appetite for alternatives increases, positive for ILS


A significant number of pension funds show an increased appetite for investment risk and alternative asset classes, according to State Street, which could result in more allocations to insurance-linked securities (ILS) or reinsurance linked investments,

As reported previously by Artemis part of the reason the alternative asset class space, which includes ILS, catastrophe bonds and reinsurance linked investments, has witnessed continued growth is down to institutional investors, like pension funds, increased shift towards the market.


Alternative capital could take 50% or more of global prop cat market


Alternative reinsurance capital and insurance-linked securities (ILS) could command 50% or even more of global property catastrophe reinsurance market limit as the ILS investor base continues to grow, Brett Houghton of Fermat Capital said at a recent event.

Alternative capacity is set to continue growing, both as the ILS investor base continues to broaden and shows increasing interest in the space, Houghton a Managing Principal at specialist catastrophe bond and ILS asset manager Fermat Capital Management LLC commented during a panel discussion at investment bank Macquarie’s 2014 Bermuda in Boston event last week.


IBM adds cat bonds to mix as it diversifies return-seeking assets


IBM Pension Plan has invested £60m in catastrophe bonds as it decreases its exposure to higher-risk assets and focuses on investments that will provide a diversified source of return.

Catastrophe bonds are centred on natural disasters and are highly concentrated on US wind risks, such as hurricanes.

The scheme’s most recent annual report, released in July, announced a move into reinsurance made at the end of last year.

Pension funds still attracted to ILS investments, as new mandate shows


There has been a lot of discussion lately about whether pension funds would be among the first investors to lose their attraction to the current market environment of lower reinsurance and catastrophe bond pricing by turning heel and exiting the sector.

However the opposite appears to be largely true, with some pension fund investors keen to increase their allocations to the space, when market conditions allow, while still more want to enter the sector (as evidenced by new mandates) and others continue to do their research into insurance and reinsurance linked investments.

There have been a number of cases in recent weeks of pension funds which have been invested in insurance-linked securities (ILS) for a number of years pulling back as a reaction to the lower pricing environment. For some investors, who entered the ILS asset class purely due to the returns of the last few years, the decline in pricing makes the sector less attractive. This is an expected consequence of the lower price environment, but not all pension funds are the same or have the same motivations.


Alternative capital, ILS take 20% of catastrophe reinsurance market: Aon Benfield


Alternative reinsurance capital, made up of insurance-linked securities (ILS), catastrophe bonds, collateralized reinsurance, sidecars and ILW’s etc, has captured 20% of the property catastrophe reinsurance market, according to Aon Benfield.

The stunning figure, which clearly underscores the growth of the capital markets and its full-on convergence with traditional reinsurance coverage, is for an annual period of review from Aon Benfield’s latest ILS market report.