ILS becomes mainstream option

The use of insurance-linked securities (ILS) by the world’s biggest insurers and reinsurers is increasingly becoming the norm according to two recent surveys – but only if the terms and conditions around the product are competitive compared with more traditional forms of coverage.

A poll of insurers and reinsurers by Guy Carpenter at the recent Property Casualty Insurers Association of America (PCI) conference, found that 16 percent of those polled will utilise alternative capital sources in the year ahead.

But it seems the bigger the company they more likely it is to use ILS. A separate survey by Swiss Re of the biggest insurers in the US found that 13 of the top 20 have used ILS in the past and were considering using it in the future. Even firms that are not using ILS now, say it remains on their radar.

A source at Bermuda based re/insurer Catlin said that the company will consider using ILS if the price and coverage offered a distinct advantage over other forms of protection. “It’s a case of whatever fits best,” the source said.