ILS market remains robust

01-11-2011

Fifteen years since the first insurance linked securities (ILS) were launched the market is still growing as more and more organisations choose this method as a way of transferring risk, according to a report by Swiss Re.

The report noted that a growing number of insurers, reinsurers, governments and corporations are using the capital market solutions to finance growth, manage their capital and transfer risks related to natural catastrophes and other extreme events.

“The ILS market is strong and poised for continued growth,” says Martin Bisping, head of non-life risk transformation at Swiss Re. “Our investor and sponsor base is made up of stable long-term partners and we consistently generate new interest in the sector. We believe this combination will lead to a continuation of robust ILS market growth.”

This positive outlook was echoed in a recent report by Aon Benfield Securities, which found that although issuance of cat bonds was slightly down for the first half of 2011 compared with the year before, issuance levels were largely the same.

“Consistency in issuance, including strong participation from repeat issuers, demonstrates the continued reliance of both sponsors and investors on capital markets capacity,” says Paul Schultz, president of Aon Benfield Securities.

“Renewed interest in sidecar structures also demonstrates the flexibility of the ILS market to provide fresh capital following market losses.

"Despite the effects of both the Great East Japan Earthquake on March 11 and the major updates of the RMS US Hurricane and Europe Windstorm models, we anticipate a good catastrophe bond issuance pipeline in the historically active second half of the year. Additionally, we believe the fundamentals are positive for market growth in 2012 and beyond.”

Catastrophe bonds, Cat bonds, Rating agencies, Alternative risk transfer

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