Analysis

A trend for slightly riskier bonds has brought with it a rise in the absolute margin on offer.

The cat bond market is thought likely to receive an outsized portion of any capital inflows.

Beazley executives spoke of further growth prospects in the class, after its results revealed a 79% combined ratio for its cyber division in 2022.

A canvass of Lloyd’s market executives generated an expected combined ratio of 92%-93% for 2022.

Reinsurer-owned ILS platforms were challenged to grow fee income in a tough year for nat cat losses and as cat market economics shifted.

The reinsurer said in its Q4 earnings call that Argo’s takeover further diversifies its operations and adds a foundational piece to its expanding P&C activity in the US.

The two top-performing funds in 2022 were interval funds.

Following rate increases at 1 January, projected fund returns for 2023 are up several points year on year, with a boost also from higher Treasury rates.

Early evidence is leading the (re)insurance market to hope the storm can avoid the development curve of its 2017 predecessor Hurricane Irma.

The headline market drop in AuM belies a more lively growth story for funds operating outside of the ILS major league.

Beazley’s bond was hailed as a “great first step” but challenges remain, although others are already working on narrower cloud outage transactions.

The sidecar has been taking on more cyber risks in recent years, sources said.

Their view that “investors have never had it so good” speaks of a market in an upbeat mood as of January.

Potential rotation of the investor base, along with continuing evolution in ESG and non-cat products, are set to be themes for the upcoming year.

Key themes of the renewal that resonated across the ILS investor base include the elevation of attachment points, though lack of take-up of named perils coverage may disappoint some.

Cedants are grappling with rising rates while coverage narrows.

The market is characterised by rising prices and shrinking deal sizes as investors pick and choose over which bonds to back.

Tension is emerging at the reinsurance level over the retrenchment from all-perils coverage, which previously offered ‘sleep-easy protection’. 

The European cat market is hardening faster than expected but the process is being delayed by ongoing negotiations over retro protection and varying lists of reinsurer demands to improve terms.

Hurricane Ian’s legacy will undoubtedly lead to some shake-ups in the ILS sector, with ongoing progression outside cat and ESG strategies likely to be a focus.

Investors are in the driving seat and able to ask for improvements such as higher extension spreads.

Expansion is set to be a trend across Lloyd’s as syndicates look to capitalise on a hardening market.

Initial loss estimates for the last quarter show lower hits to equity than observed after hurricanes Harvey, Irma and Maria five years ago.

Some firms have fared better than others in the competition to raise funds during the year.