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Pockets of new capital will not shift pricing at mid-year.
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The depth of the retro market recovery will be an influential factor in the pace of the cat market slowdown from here.
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Cat bonds and sidecars are well positioned for growth, while private ILS will benefit from further innovations to improve liquidity.
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Competition for remote risk deals intensified as more capital has targeted the swathe of business that has historically been the heartland of ILS.
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The cost of maintaining a team to service institutional investors does not always weigh favourably versus bringing in ILS capital.
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Prior-year cat loss years that are finally shaking out drove fee benefits in Q3.
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Fermat’s John Seo said the industry can “see the wall of money coming in, but it’s coming in slowly”.
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A number of players suggested that the cost components of first-party claims were up between 30%-50% on that seen during Ransomware Wave One.
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A challenge facing the industry in the years to come is the question of how can it move through a rotation of its investor base to capture the growth opportunities that have arisen.
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The obvious question is where is the capital behind the letters of credit that were being pledged on its transactions.
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With fundraising still difficult outside the liquid ILS segment, managers are looking for ways to shore up their economic proposition.
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From seeing ILS as a fleeting competitor to a complement to traditional reinsurance, Denis Kessler’s descriptions of the alternative market were always colourful.
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Removing any competitor is a positive for ILS peers in a competitive time for fundraising, but it is not clear how much of a boost this will give RenRe.
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Capital has begun to flow again after a challenging time for ILS fundraising in 2022 – but there is a clear shift underway.
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There are enough drivers supporting the trend for cat bond segment growth that ILS managers are likely to be plugging this business heavily in the short term, even if it is less attractive in fee yield.
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The new higher-rate world brings the threat of some investors staying in a risk-off mentality.
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ILS managers have pioneered externally managed rated carriers, but have done so with cost-consciousness in mind.
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Reinsurers congregating in Bermuda flagged a lack of interest in helping under-capitalised Floridian insurers and under-priced diversifiers, with positive implications for ILS participation.
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Fermat’s John Seo divided the potential incoming capital broadly into “fast” and “slow” capital.
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Should reinsurers retain the option of playing in ILS, or take a ‘go hard or go home’ approach?
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The outcome over the debate on narrowing cat reinsurance coverage will not be an all-or-nothing bet, with all perils deals with exclusions not a polar opposite of named perils coverage.
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Several structural factors, including the pricing cycle, make insurers more insulated from US activist states.
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High-yielding alternatives are taking away attention from this sector, with its complex narrative around recent losses, and diversification only goes so far in selling its story.
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Announcements and interviews at the UN conference have shed light on the tools emerging to help carriers decarbonise their underwriting portfolios.
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Major questions confront the industry after Hurricane Ian, but no matter the answers, certain outcomes are inevitable.
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Buyers are more open than ever to different sources of capacity, but the timing of entry will not be on the industry’s terms.
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Some are suggesting a rotation of the investor base may be underway, with a move back towards more opportunistic funds.
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Ratings agencies suggest that carriers must do better on controlling volatility – but diverging risk appetites give the lie to the idea that the industry is walking away from risk.
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As the ILS market heads back to the office after summer breaks to get stuck into a busy conference season, we recap our top summer features and news coverage that you won’t want to miss.
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In the absence of a major tactical shift from Demotech, will the reinsurers become the de facto selection party determining which domestics survive?
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Market orthodoxy suggests cross-class reinsurers secure more leverage – but are there too many implicit offsets in this game?
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Collaboration should help protect against greenwashing fears but the industry should start with leaving behind the issue of the sector’s “inherent ESG” appeal.
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With reinsurance availability scarce and costs rising, several carriers have called an interim halt to new homeowners’ business.
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The carrier has shared insurance and reinsurance risk with ILS partners in the past, but the ILS team reports to Axis Re CEO Steve Arora.
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In certain areas more collaboration is needed but in others the market will continue to get more diverse as investors respond to post-Irma challenges in differing ways.
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Even though underlying ILS market conditions are improving, getting a hearing from investors could become harder.
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Catastrophe reinsurers are already off to a messy start for the year and may have eroded a significant part of their year-to-date Q1 cat budgets as floods are still unfolding in Australia following recent European/UK windstorms.
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Absent more significant reform, any changes this year look set to simply shift the timing of burdens falling on the public purse.
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Many investors are in a “hold and assess” pattern on ILS, but some changes in the broader landscape could be more positive for the industry.
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Greater participation of cat bond investors in the retro market has some advantages alongside the risks.
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The “squeezed middle” of the reinsurance sector is under pressure, but attritional risk aversion could drive ongoing changes.
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Cat risk-takers are benefitting from some money leaving the sector, but is this disruption creating inefficiencies as well?
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This year, instead of talk about running late, people were highlighting how the starting gun has barely been fired.
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The retro renewals are barely underway, as a challenging fundraising environment and queries over loss experience has delayed the typical pace of progress.
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Re-allocation of capital rather than true growth seems to be a more likely outcome for the sector in the near term.
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S&P suggested that an “abrupt rethinking” was a more likely outcome than gradual pricing increases – but a third way is possible if ratings agencies set a glidepath to change.
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The lower-than-expected losses so far from Ida do not stack up against what is thought to be a $30bn+ cat event.
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Recently one of my colleagues argued that it was time for a “bonfire of PMLs”, as the past five years have shown that the industry has seriously underpriced the kind of $10bn-$20bn loss events that have been happening since Harvey, Irma and Maria landed in 2017.
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