Generali prefers ILS for windstorm protection

Italian insurer Generali is taking advantage of more attractive conditions in the insurance-linked securities (ILS) market for windstorm reinsurance protection.

The group has historically preferred traditional reinsurance as a tool for mitigating catastrophe risk resulting from its property/casualty portfolio, adopting a centralized approach where the placement of reinsurance towards the market is managed through a central group reinsurance function.

But given a trend of increasing weight of European windstorm exposures in the protected portfolio in the past years, Generali has carved out part of these exposures from the main reinsurance protection and placed them in the ILS market, which was offering more competitive terms, the company said in its 2017 annual report.

In July, 2017 Generali returned to the ILS market with a €200 million catastrophe bond on floods and windstorms in Europe and earthquakes in Italy, through a reinsurance agreement with Lion II Re DAC, an Irish special purpose company, providing per occurrence cover in respect to any mentioned events which occur to the Generali group over a four-year period.

The Lion II Re transaction transfers part of these risk to the bond investors allowing for a more optimized protection for the group against catastrophes, according to the annual report.

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