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ILS market grows to $93bn

The insurance-linked securities market is seeing “convergence of convergence”, according to Willis Towers Watson.

The reinsurance broker and risk adviser said in its ILS Market Update that the market had reached $93 billion of outstanding non-life capital by the end of 2018, despite a slowdown during the fourth quarter.

The report stated that lines of demarcation within the ILS space were blurring, as ceding companies and intermediaries look to the range of catastrophe bonds, sidecars, and other collateralised ILS, to identify the best tools to meet specific challenges, continue to develop new solutions, and refine existing structures.

This blurring of categories should help the ILS market to overcome concerns including prompt loss reporting, valuation accuracy, collateral release and rollover, and increasing volatility, the report contends.

Two-way transparency both for ceding companies and investors is key, and solutions to many specific challenges seem close at hand.

“We are seeing the convergence of convergence,” says William Dubinsky, managing director and head of ILS at Willis Towers Watson Securities.

“The overall ILS figure is today a much more meaningful measurement of market size than focusing on cat bond and sidecar issuance alone.

“ILS capacity and products are growing organically and dynamically as gaps between different products and subsectors fill in, and innovation and market necessity create new capacity and products.

“Our confidence in the speed that new solutions will emerge gives us a favourable outlook for ILS in 2019.”

The report said that in the face of multiple smaller catastrophic events in 2018 and a meaningful series of catastrophes in 2017, non-life cat bond issuance remained strong.

About $9.2 billion of new capital was delivered, marking the second most active calendar year ever. Of $535 million in bonds issued during the fourth quarter, $125 million provides protection from California wildfire liability, $200 million grants peak multiperil protection, and $210 million covers US earthquake (workers' compensation).

Big slice: a fifth of fourth-quarter ILS issuance covers California wildfire risk (File photograph)

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Published January 30, 2019 at 8:00 am (Updated January 29, 2019 at 6:40 pm)

ILS market grows to $93bn

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