Florida programmes demonstrate strategic restructuring
Florida reinsurance programmes underwent more strategic restructuring in the first half of 2015, with commensurate gains for shareholders and policyholders.
That is according to the latest insurance-linked securities (ILS) report from Willis Capital Markets & Advisory (WCMA).
However, the report also notes that the majority of re/insurers are missing the chance to restructure their reinsurance programmes to better integrate ILS capacity and make greater performance and efficiency gains.
Bill Dubinsky, managing director and head of ILS, WCMA, said: “Ceded reinsurance executives should not focus on using ILS to buy the same reinsurance programme as in the past more cheaply. Insurers instead should be looking to restructure their reinsurance programmes to better integrate ILS capacity and make more dramatic performance and efficiency gains, ultimately to the benefit of shareholders and policyholders.”
According to WCMA, the reinsurance industry has been animated by initiatives such as Nephila’s fronting relationship with State National to enter the US direct insurance business.
“Such ventures are more toward the beginning and not the end of a wave of dramatic structural change caused by ILS moving from reinsurance to insurance,” said Dubinsky.
According to the report, the second quarter of 2015 saw $2.7 billion of non-life catastrophe bonds issued through nine transactions. This follows a historically strong first quarter in which the market saw $1.5 billion of issuance, and brings total non-life capacity issued year-to-date to $4.1 billion.
The report also highlights that indemnity deals dominated the second quarter of 2015, with all of the 144A transactions issued during the period having used an indemnity trigger.
“The increase in indemnity trigger use in part reflects the increasing sophistication of the pool of investors as the market matures. The trigger migration also broadens the potential pool of sponsors as some insurers remain reluctant to expose themselves to potential basis risk resulting from index triggers, notwithstanding the potential premium savings from doing so,” said Dubinsky.
