ILW market may grow over 20% in 2023 as insurers grasp for more limit

The market for industry loss warrants (ILW) could grow by as much as $1 billion in 2023 from $4.5 billion in 2022 as insurers struggled to add limit to their reinsurance protection programmes, reinsurance brokers at  Gallagher Re are telling clients.

“There is significantly more demand from insurers to unlock new limit as we enter this harder market,” Gallagher Re reinsurance/retro broker Alex McManus (pictured) told the governing board of the Texas insurer of last resort, TWIA.

McManus cited $4.5 billion “heavily traded worldwide throughout the year” of conditions in 2022.

“And I think it is fair to say that with the market how it is at the moment, we'd expect that figure to be near $5 to 5.5 billion of limit traded worldwide” in 2023, he said.

Together with the segment of cat bonds triggered by the PCS index that guide ILW payments, a figure near $7 billion in traded risk is based on the index from Verisk, he noted.

Insurers and industry related non-traditional buyers are likely to increase their role in the buyer pool from the 60% seen to date as the search for new limit continues, McManus said.

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