ILS issuance on target for $9bn in 2014
The ILS sector is set to hit a record-breaking year for non-life insurance-linked securities (ILS) issuance, despite a relatively quiet third quarter, according to a report from Willis Capital Markets & Advisory (WCMA).
Some $8-9 billion of non-life issuance is expected to reach the industry by the full-year 2014, breaking the full-year record set in 2007, of more than $7 billion.
While Q3 in the same period last year saw $1.4 billion of non-life catastrophe bond capacity issued, Q3, 2014 saw only one transaction come to market: State Fund’s Golden State Re II, covering workers’ compensation risk against earthquakes.
“Q3 followed a robust issuance season with new capital having already been deployed. It will only take about $1.2 billion more in 2014 to break 2007’s non-life ILS issuance record, so we believe this is incredibly likely,” said Tony Ursano, chief executive officer, WCMA.
Bill Dubinsky, head of ILS, WCMA, said: “Alternative capacity is becoming an integral component of sponsors’ risk transfer strategies, and ILS is being fully integrated into reinsurance purchase decisions. A quiet Q3 was not surprising. 2014 is still on track to be a record breaking year and we maintain our prediction of a final tally between $8 and $9 billion of non-life ILS issuance.
“But the actual number is not the key point here. More interesting is the broader participation of investors in sidecars, cat bonds, and collateralised reinsurance, which continues to grow.”
The report also highlights that deals have become more diversified, with more individualised approaches to positioning ILS capacity in existing reinsurance structures. This indicates that ILS has broader potential application than many previously thought and hints at continued market growth.
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