ILS market hits US$75bn

Non-life insurance-linked securities (ILS) capital grew again last year as the market continued to diversify into new products and perils and meet the demands of its increasingly broad group of investors, reports Willis Capital Markets and Advisory.

WCMA, the investment banking business of the global risk advisory and insurance broking group Willis Towers Watson, reports in its latest ILS Market Update that total ILS assets under management in 2016 grew to US$75bn, up from US$70bn the previous year.

In Q4 2016 the ILS market saw a pick-up, with US$2bn of non-life catastrophe bond capacity issued through five transactions, compared to US$1.4bn issued in the same period of 2015.

Although fourth quarter issuances came from repeat sponsors, they brought diversifying perils to investors. Italian insurer Assicurazioni Generali’s Horse Capital I, covering motor third party liability risk was the first bond since 2007 to do so, while XL Bermuda’s Galilei I Re was the first bond to cover Australian tropical cyclone and Australian earthquake since 2013.

“Growth alone was not, however, the whole story as diversification by peril became increasingly important to investors, as did different approaches to liquidity and leverage, dependent on each investor’s appetite for ILS risk,” said Bill Dubinsky, head of ILS at WCMA.

On the market outlook for 2017, Dubinsky said: “Our expectation is that assets under management will continue to grow at roughly the same pace as in 2016. Leverage and diversity will also increase, led by a greater level of sophistication amongst the established investor base.

“At the same time, newer investors will continue to seek the greater liquidity that the traditional catastrophe (cat) bond product offers.”

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