13 September 2015 Insurance

Priebe predicts growth in evolving ILS market

David Priebe, vice chairman of broker Guy Carpenter, foresees further growth in the insurance-linked securities (ILS) market.

Speaking to Monte Carlo Today, Priebe said that Guy Carpenter continues to see a very active ILS market, with very strong interest on the part of sponsors.

“The number of sponsors is growing throughout the world,” he said. “We’re increasingly seeing an expansion of bonds in Asia and other parts of the world, such as in the Caribbean, in China, in Japan, in Australia, so really the ILS market is now taking on a global tenor.

“Investors are willing and actively seeking to trade in all forms of risk, not just US wind and quake, but also other perils throughout the world.”

Another positive feature pointed to by Priebe was the increasing participation of large corporations accessing the ILS market for additional capacity. He also said that new trigger structures were being developed, along with new forms of risk designed specifically to meet their specific circumstances, so that the market was seeing a wide range of parametric solutions designed to trigger around certain events that could potentially cause meaningful losses.

Asked if these cat bonds could increase or decrease in size Priebe replied: “That’s hard to say. Right now we’re projecting that in 2015 the total issuance will be close to $5 or $6 billion, which will be less than the record issuance last year.

“We have a growing element in the private cat bonds. The publicly traded bonds will continue to be a very significant part of the business and will certainly have a long-term growth opportunity, but even more significant will be the implementation of private cat bonds.

“So, the aggregate amount of exposure going to capital market investors will continue to expand. We’re not sure that it’ll continue to expand at the 22 percent compound rate that it has since 2008, but it will certainly continue at a very fast rate and remain a mature market.”

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