Willis Towers Watson has tipped that greater focus will be drawn to ILS domiciles and structures in 2020 amid an “unusual amount of innovation” from existing and emerging jurisdictions.
The deal points to a significant price correction in the cat bond market since 2018, with projected spreads up more than 20 percent when compared with past deals.
It will be many months before the $11bn payout agreed between Pacific Gas and Electric Company (PG&E) filters through to the (re)insurance and ILS markets, with this lump sum likely to benefit some parties more than others.
Panellists at Trading Risk’s conference in New York said they were adopting a wait-and-see approach to Lloyd’s Blueprint One proposals intended to make it easier for ILS managers to participate in the market.
Access to risk has been the biggest driver of M&A deals for independent ILS funds, TigerRisk Capital Markets & Advisory co-CEO Jarad Madea said at Trading Risk’s conference in New York last month.
Benjamin Franklin apparently once said that ‘nothing in life is certain except death and taxes’ – and it seems like the adage resonated with the risk modellers of the (re)insurance industry.
Broader risks could entice new investors to the ILS space, Dan Brookman head of alternative capital at Axa XL said at Trading Risk’s conference in New York earlier this month.
The EUR45mn ($49.50mn) Atmos Re I cat bond from Unipol is likely to lose nearly 50 percent due to severe weather events in Italy, according to sources.
The ILS market’s shift toward lower-attaching risk in the past decade meant it had much higher exposures to the 2017/18 losses than to the last active hurricane season in 2004/05.
Non-life insurers in Japan are anticipating a 300bn yen ($2.8bn) loss from Typhoon Faxai, the chairman of the General Insurance Association of Japan has said.
Cat bond pricing volatility in the first half of the year meant that some cedants didn’t want to risk entering the market, the Willis executive told Trading Risk.
Pricing has not increased to levels that compensate for the volatility in the sector in the past couple of years, the investor said in an earnings call.
The UK regulator has said that it is happy to discuss proposals with applicants who think their structures meet the principals of being ‘fully funded’.