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How low can they go?


How low can they go?

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Brian Tobben, chief executive officer of Aspen Capital Markets, takes a closer look at the capital markets’ return requirements for catastrophe risk. He suggests that as the Insurance Linked Securities (ILS) market matures investor return targets for catastrophe risk will be primarily driven by long term average corporate bond spreads.

Are We There Yet?

The recent price stabilization in the ILS sector has led many to wonder whether the market has found a permanent pricing floor. This possibility is bolstered by reports that capital inflows into the largest ILS funds slowed to a single digit percentage increase in 2016. Further, Aon Securities recorded 2015 cat bond issuance of $6.9 billion, well below the $8.3 billion of issuance in 2014. Some have concluded that the capital markets appetite for catastrophe risk is waning.

ILS market promoters counter that the market is still growing and now manages $70 billion of catastrophe risk according to Willis. They argue the slowing growth of the catastrophe bond market masks gains in collateralized reinsurance.

United States, Aspen Capital Markets, Disaster Accident, Business Finance, Hannover Insurance-Linked Securities GmbH & Co. KG, AON BENFIELD SECURITIES, INC

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