26 April 2017Insurance

ILS tipped for record year despite slower Q1

The insurance-linked securities (ILS) market is “firing on all cylinders” and set for rapid growth stemming from a robust pipeline, despite issuance in the first quarter of 2017 lagging levels in the same quarter a year earlier, according to a report by Willis Towers Watson Securities.

The ILS Market Update report revealed that some $1.7 billion of non-life catastrophe bond capacity was issued through five transactions in the first quarter of the year, a decrease on the $2 billion issued through nine deals in Q1 2016.

But the report suggested that the ILS sector might still achieve a bumper year.

“The ILS market is firing on all cylinders in early 2017. There is a robust pipeline with nearly a record level of deals completed. ILS funds are raising capital and putting it to work,” the report said.

“Sponsors are responding to the attractive spread environment by seeking new protection backed by liquid ILS (cat bonds) as well as continuing to ramp up protection in other forms. A record year seems possible.

“While spread levels have exited free fall, they continue to decline as investors put more money to work and grab market share. The breadth of the ILS market continues to expand not only by products and perils but also in the diversity of ILS investor risk-return appetites. This flurry of activity, though, is only part of the story.”

Bill Dubinsky, head of ILS at Willis Towers Watson Securities, added: “As expected, assets under management have continued to grow at roughly the same pace as in 2016. This is against a backdrop of challenging market conditions as competition among various players intensifies.

"Looking ahead we can be confident that the ILS market will continue to expand and grow as reinsurers and other players invest in this space.

"The breadth of the ILS market continues to expand not only by products and perils but also through increasingly differentiated risk-return appetites among the various investors."

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