Four questions the ILS industry needs to answer

With the January 1 reinsurance renewal behind us, it’s time to look ahead, says Tom Johansmeyer, assistant vice president, reinsurance services, marketing at ISO/Verisk Insurance Solutions.

Throughout the renewal season, many questions arose about the future of the market, particularly as to accessing risk from new classes of business. Rather than peer into the crystal ball and try to see what’s coming, now is the time for the global reinsurance industry to ask hard questions about where growth will come from—and take decisive action to create solutions. For the coming year, the industry should ask—and discuss—these four questions:

1. Will publicly managed entities return? Only one catastrophe bond came to market from a publicly managed entity in 2016 (Ursa Re), following several years of significant activity from this sector. The absence of this category of sponsor clearly had an impact on the year’s overall issuance. The return of the publicly managed entity sponsor base would drive considerable year-over-year growth for the space in 2017.

2. What will gain traction? Over the past few years, we’ve seen several innovative catastrophe bonds that suggest broader issuance potential: Bosphorous Re, Panda Re, and Operational Re are among them. However, innovative transactions like these seem to come on a one-off basis. Finding scalable classes of business could provide a meaningful foundation for future catastrophe bond market expansion.