Retrocession
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The reinsurer said retro pricing had ‘moved slightly in our favour’ at 1 January.
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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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The investment firm said cat bond spreads that are elevated relative to historical levels continue to offer an attractive entry point for investors.
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Projected 2024 ILS returns remain historically high, but signs of increased appetite for top-layer cat risk and top-end retro raise questions over how long this will last.
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The pricing on the deal has settled below initial guidance at 7.5%.
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The firm said it would cut its K-cession ‘significantly below 2023 levels’ and buy ‘broadly similar towers of non-proportional retro’ at 1 January.
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Sang Hun Park previously spent nine years at Allianz before joining Munich Re as a senior origination manager in August 2021.
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The capital management platform remains active but January renewals were fronted by the balance sheet.
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The carrier has increased its retro capacity by 56% to EUR1.34bn.
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More retrocession capacity is likely to be deployed during 2023 as pricing holds up across the primary, reinsurance and retro markets, according to Conduit Re.
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The intermediary recorded “one of the hardest reinsurance markets in living memory” as primary rate increases slowed.
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The exit highlights increasingly difficult conditions in the retro and reinsurance markets.
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The carrier has become the latest in a string of reinsurers unwilling to write retro at 1 January.
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The RenRe vehicle, formerly a major retro writer, has been a reduced force this year.
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It is understood that Ascot will continue to write worldwide retro business.
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Hannover Re said that it expected its total gross Ian losses to be slightly below EUR400mn.
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Fidelis and MS Reinsurance are among the ceding companies that have support from Ajit Jain’s unit.
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The firm’s European regional treaty cover shrank 9% to $398m.
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The firm assigned a neutral outlook overall to ILS but is strongly positive on many non-life risks as it seeks diversifying strategies that can withstand inflation.
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Rates have climbed 20%-35% since 1 January, and 40%-50% year on year, sources estimated.
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It noted that its aviation and marine books are covered by retro although its exposure is “not very material”.
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It will offer components for buyers looking for indemnity, parametric or blended coverage.
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The carrier took a net EUR838mn of cat losses in the full year.
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The carrier’s whole-account XoL retro also shrank by a similar margin.
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Greater participation of cat bond investors in the retro market has some advantages alongside the risks.
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Retro renewals have made major progress in early January, but programme gaps remain at some levels, with reinsurers left carrying more risk net.
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Some programs had to be restructured as rates hardened and capacity flowed away from cat risk in some cases.
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The move comes amid limited availability of annual aggregate cover.
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CyberCube forecast further capital market capacity will hit the cyber insurance market next year.
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1 January renewals are running late across the board as reinsurers hold out for improved terms, but the retro segment is the most challenged for capacity.
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The carrier is looking to raise annual aggregate protection from the new ILS deal.
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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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The insurer said its plan was to fully transition the book to the fund.
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The CFO said today’s favourable nine-month numbers were due to a sustained effort to improve P&C underwriting discipline.
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Surpassing the $30bn threshold will trigger more occurrence covers, as another painful year looms for aggregate writers.
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The convergence of traditional reinsurance and ILS has seen reinsurers’ fee income rocket over the past three years.
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Retro rates were in some cases falling by mid-year, ahead of the recent losses.
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Hannover Re CEO Jean-Jacques Henchoz told Trading Risk there was a “question mark” about whether demand would carry over into next year.
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Outside the US, two Indian cyclones are expected to have caused more than $4.5bn of economic losses.
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The former Peak Capital CEO has left the ILS platform he set up.
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Initially, negotiations are likely to be led by risk takers but there could be a case to model a future role for service providers.
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There is little sign of retro demand returning after buyers cut back in January.
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The start-up's new hire was a founding member of the leadership team at Fosun-owned Peak Re.
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The former Bermuda Brokers and JLT Re broker says ILW appetite is expected to remain strong after benefitting from pandemic trading activity.
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The executive will take up the Hong Kong-based post on 1 September.
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The carrier last year said its K sidecar would pick up Covid claims over time.
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One swallow doesn't make a summer, but what do two retro "cashback" transactions portend for hurricane season?
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Simon Moore has joined Lockton Re as a senior broker in the company’s non-marine retro and property specialty team, based in London.
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Hannover Re and Fidelis provided significant capacity on the Munich Re-led programme.
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ARPC said the move improves the pool’s capital strength.
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ARPC said the move improves the pool’s capital strength.
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The reinsurer was chasing a high 15% net return target but said lower demand and capital trapping made this unachievable
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The Bermuda-based broker is believed to be heading to Corant along with other hires.
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Some markets on the programme have pushed back on the inclusion of event cancellation exposures.
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A new mandate from an institutional investor has seeded the strategy.
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The capital supports the MGA’s excess retro portfolio.
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The retro specialist joins the firm as it prepares to expand its reinsurance interests after spinning out of Willis.
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The broker forecast that this hard market may be more akin to the “discriminate and relatively short-lived" phase following 2005.
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Aggregate retro capacity has “reduced enormously” but rate increases were less severe than some had feared, the Willis Re international chairman said.
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Capacity was constrained but some ILS funds were able to grow, while cat bonds also propped up supply.
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New capacity and fewer problems with trapping contributed to a smoother renewal than some had expected.
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This is the carrier’s first public cat bond after a private deal done through Guy Carp’s Cerulean platform in 2019.
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The executive will lead the retrocession and property specialty segments.
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If the fundraise closes, the business will operate as a “permanent capital” monoline retrocessionaire.
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Pessimism around trapped capital is growing, but low reported losses may mitigate the issue.
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Scor sought higher-priced agg cover, but Munich Re achieved below-average uplift on its occurrence treaty.
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Retro deals make up a third of this year's volumes, versus a quarter in 2019.
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Investors from the ILS boom era are also those who've had the least luck, so fundraising remains a slog.
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Covid-19 may have been the biggest talking point in the (re)insurance markets this year but arguably, the pandemic is being overtaken by several other factors – ILS market dynamics amongst them.
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RenRe thinks the major cat losses of Q3 will cause the property cat market to harden throughout 2021.
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The carrier says higher retro renewal costs will act as a counterweight to rising rates.
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Hannover Re's K sidecar includes exposure to the aviation market, but overall ILS participation in such risks is limited.
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The move marks the company’s fifth round of share redemptions since going into run-off.
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If reinsurers prevail in limiting insurers from aggregating BI claims, this will shield retro markets.
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Total insured losses are well up on 2019, but the severity of individual blazes is not likely to impact reinsurers extensively.
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Collateralised capacity will retain an important role in the retro niche.
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Retro structural change will provide a lot of the gains in 2021, with trapping negotiations complicating the mix.
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The carrier's Ada Re vehicle will join its Turing Re sidecar, but its capacity is not known.
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The CEOs of Aon Reinsurance Solutions, Willis Re and TigerRisk predict limited rate gains, but up to $10bn of incoming capital.
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A much harder retro market is driving reinsurance price increases.
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Having fuelled up on retro to grow, some carriers may need to focus on managing net exposures.
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The retro space is expected to move towards named peril covers as rates approach post-Hurricane Katrina levels.
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The market is also interested in more liquid cat bonds, the reinsurer said at a press conference on Monday.
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The release from side pockets will be paid to the company in October.
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Retro specialist Richard Wheeler will head the unit, which will focus on sourcing third-party capacity.
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Earlier this month, we recapped some of the issues causing rising tensions in the retro market, where providers are pushing for release of capital trapped in connection to Covid-19 claims.
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The P&C business posted a EUR167.9mn underwriting deficit on EUR380mn in Covid-19-related losses.
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With the fundraising season approaching, tensions are rising over several points of dispute.
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CEO Kevin O'Donnell also noted that RenRe had dropped one-third of its Florida clients.
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Following two decades at Aon Benfield, he will join Lockton sometime next year after his gardening leave.
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The (re)insurer placed a new $100mn enterprise cover, ahead of the $350mn bond elapsing.
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Willis Re's head of international says clear reinsurance rating momentum falls short of being a true hard market phase.
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An influx of underwriting capacity will likely limit the extent to which reinsurance rates rise, the agency said.
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People moves in the ILS marketplace.
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Bond spreads settled at the lower end of the revised guidance.
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Jeremy Lee had been at Aon and Benfield for over 22 years.
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Limited mid-year trading has continued but buyers have cut back.
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The capital release was largely connected to 2019 side pockets.
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RenaissanceRe raised $913mn from a new share issuance last week, with joint venture partner State Farm investing a further $75mn.
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Trading was brought forward this year and more cedants could head to bond market.
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The bond will renew only part of previous Blue Halo cover benefitting Nephila's fronting partner.
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Collateralised re and sidecars are more likely to become subject to legal disputes around wording, the agency said.
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The ratings agency said positive innovation efforts were partly offset by high dependency on retro.
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If Covid-19 is a slow-growing loss, fundraising may not come in through fast-access ILS routes.
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Reinsurers push back on aggregate exposure from cascading covers as market gets more differentiated.
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Retro deals are seen as a particular concern over growing fears that trapped capital will again be an issue in 2021, as post-2017 innovations will be tested out.
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BI may seep into some reinsurance and retrocession covers but insurers will take the biggest hit, said the head of ILS at Schroders.
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Peak Capital will continue to focus on its flagship retro strategy as it develops fresh offerings.
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Spillover from the Covid-19 stock and bond market crashes made for some turbulence towards the end of the quarter despite the impressive volumes issued.
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The reinsurer is moving to expand its North American business.
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Catastrophe losses saw a 31 percent hit to the fund's 2019 portfolio with attritional losses coming in more than three times as high as budgeted.
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The firm's K sidecar avoided major Dorian claims, as the firm also grew its whole-account covers.
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This came as major losses ceded to retro partners reached EUR541mn.
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The mutual added a £100mn lower layer to reduce the attachment point to £400mn.
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Collateral negotiations are coming to the fore in retro renewals.
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The fund has cut back in retro but plans US insurance expansion.
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The fund intends to pay 90 percent of its current cash to investors with much of its portfolio held in side pockets.
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The UK terrorism insurance scheme looks to add additional layers to its main 1 March retrocession renewal.
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The carrier said the market was in the early stages of rate change and it was hard to know how long improvements would last.
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The firm will consider writing more retro after raising $300mn new equity.
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Pricing slipped to the lower ends of the guidance ranges as the reinsurer upsized a hurricane tranche of the trade, sources said.
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The former Aon retro broker was previously CEO of the UK arm at Fidelis.
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Further retro price increases at 1 January may not have yet produced much impact on the underlying reinsurance markets, but the true test will come at 1 June.
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New issuances fell to the lowest level since 2011, amid an uptick in risk levels and US exposures, according to Trading Risk data.
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The retro transaction priced below the target range, according to sources.
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Trapped collateral left overall capacity flat, despite a 5 percent increase in rated capital.
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Hyperion X estimated retro rates have risen to around 140 percent of their pre-Irma levels.
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Over the past year, Willis Re's index shows riskier deals and a hardening market have lifted average cat bond yields.
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The broker's chairman of international business James Vickers said reinsurers are only trimming capacity on the edges of the cat market.
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The broker’s 1st View report highlighted diverging reinsurer tactics and segmented renewal outcomes.
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US cat reinsurance renewals moved flatter than expected as 1.1 neared.
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The reinsurer was among the blue-chip cedants to benefit from an earlier renewal and occurrence structure.
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Risk-adjusted rate increases have put returns back to 2014 era benchmarks, sources estimated.
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The main disrupted segments are still aggregate retro and sidecar vehicles, where negotiations over the level of trapped capital have held up the renewal process.
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The cat bond is the second Matterhorn deal to be launched by the (re)insurer this year.
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In its first public cat bond since 2013, the firm joins peers in seeking aggregate retro cover.
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Despite early fears that the storm could rival last year’s Jebi in losses, expectations are converging around the $10bn level.
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The reinsurer said use of third-party capital will limit its net retentions while permitting overall growth.
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We've been talking about the reinsurance market being the “squeezed middle” caught in between accelerating primary and retro markets for some time, but could Neon be the first casualty of collateral damage from this phenomenon?
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A lockup in retro capacity linked to the Japanese typhoons will further encourage reinsurers to raise rates, AIG’s Kean Driscoll said yesterday.
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Hagibis losses have become the most costly event this year for the retro fund
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The retro renewals are still in the calm-before-the storm phase but it seems that capacity limitations are set to open up more of a role for opportunistic players.
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The firm also added former Aon brokers Robert Johnston and Peter Komposch to the Bermuda office amid the reshuffle.
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Lodgepine departs from the pillared structure of Markel Catco, Markel co-CEO Richie Whitt said.
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The reinsurer reported a gross loss of EUR207.7mn ($230.2mn) for Dorian and EUR167.2mn for Faxai.
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Retro fundraising hits the wall, with Eklund downing tools on start-up.
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The former RenRe and Aeolus executive had been in talks with Warburg Pincus over a new retro fund platform.
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Wildfire recoveries benefitted DaVinci investors and RenRe's retro partners in Q3.
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The carrier’s ILS revenues tripled year on year after its Nephila acquisition.
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The firm's reinsurance CEO John Doucette said the firm saw “select opportunities” to grow its retro book.
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Dan Bailey will join the intermediary's London office next month.
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Scor Global P&C CEO Jean-Paul Conoscente said the reinsurer’s main retro programme is expected to be placed within a fortnight.
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The significant pricing difference between the reinsurance and retrocession markets does not make a lot of sense, TigerRisk president Rob Bredahl said.
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Market participants are expecting little new capacity to come from a slew of start-ups.
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Aggregate retro lock-ups will be a major point of focus for the ILS market.
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The ILS Capital Management managing partner also sees opportunities in taking business from Lloyd’s.
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The Reinsurance Opportunities Fund also repurchased $43.4mn of shares in September.
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Reconstruction in the ILS market continues, with ongoing concerns about investor sentiment, capacity growth and the impact of retro rates
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A slew of new retro vehicles were mooted at the Monte Carlo Rendez-Vous and existing players are keen to expand.
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The retro market needs to deliver better transparency to attract investors, but a roundtable of senior executives was split on the outlook for the roughly $20bn market.
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Ratings agencies remain positive on reinsurers boosting their use of retrocession to grow, despite this year’s capacity crunch in the retro segment.
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The carrier launched the retrocessional ILS fund this month with Andrew Barnard as CEO.
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Markel and a new venture from ex RenRe exec Eklund are also tapping up investors.
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Participants predicted the rate pressure that has been centred on Japan and Florida would have a broader spill-over next year.
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The potential for insured catastrophe losses has increased at an “exponential” rate since the 1970s, the broker said in a report.
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If reinsurance markets continue to be squeezed by higher retro rates, will this drive more fundamental repricing in underlying business?
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Andrew Barnard will serve as Lodgepine CEO with two other Markel staff, Jamie Welsby and John Duda, joining as key executives.
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Reinsurance conditions began moving in investors’ favour in mid-year 2019, marking a delayed reaction to 2017-2018 losses.
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The new Alternative Capital Partners entity unites the resources and capabilities of both teams, Swiss Re said.
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Continental reinsurers and Lloyd’s pulled back use of collateralised retro but overall reinsurance use of ILS retro rose from 2015 to 2018.
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Trading Risk looks at the dominant themes that the ILS market will be discussing at the 63rd Monte Carlo Reinsurance Rendez-Vous in September.
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Markel and Pimco updated the market on their ILS plans.
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Most reinsurers lifted their exposure to major cat losses heading into 2019, with net written premiums rising further early this year, ratings agencies noted.
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Improvements to models and peril exclusions are expected to encourage growth once losses have been settled, the ratings agency said.
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The fund has had to set aside more cash in side pockets after its mid-year 2018 portfolio rolled off risk.
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This will be the first share buy-back since the firm’s investors voted for the fund to go into run-off.
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The firm’s 2019 portfolio has pushed further into specialty, US insurance and Lloyd’s risks.
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CFO Vogel says he sees no further net impact from the Japanese event after first-half loss creep.
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Reinsurers are taking modest rate increases largely by “riding on the backs of primary writers”, Chubb CEO Evan Greenberg said recently.
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The Markel co-CEO also said that “noise” around the performance of new acquisition Nephila will clear up by year end.
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Its new acquisition offset lower revenues from the Markel Catco business, which will take about three years to run off.
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The new vehicle is expected to offer a range of property retrocession products on a collateralised or rated paper basis, or combination of the two.
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The retro-focussed Upsilon fund saw limited growth, while the Medici cat bond fund attracted $107mn in new capital.
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The RenRe CEO also flagged changes to the firm’s purchased and written retro portfolios in mid-year renewals.
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The reinsurer’s combined ratio deteriorated slightly due to Q2 weather events, as it benefited from retro recoveries.
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The withdrawal of Catco created retro opportunities for the reinsurer, according to the CEO.
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A total of $23.3mn is being held across bonds from 2017 and 2018.
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The firm has settled with Fredricks and will enter binding arbitration with Belisle.
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Retro brokers are itching to get back to the driver’s wheel – but they may have to wait a bit longerThe retro market has been hard hit in the past couple of years by trapped capital and losses.
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The rate increases were less differentiated than the 1 June Florida rises.
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The reinsurer’s $150mn Atlas IX Capital 2015-1 cat bond has partially triggered following an accumulation of PCS losses, sources said.
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The target size shrank from 2018 after the insurer revised the renewing portfolio, with the Bermuda-listed component dropping by $143mn.
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Reinsurers that have been reliant on retro cover also pared back their market share, as the broker said mid-year renewals showed tangible pricing momentum.
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The retro writer warned earlier this month that it was increasing its loss reserves for the two events.
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ILS funds have been among the top sources of new demand since 2017, the broker said at an Aon United ILS day in London last week.
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Rates are believed to be around 15-30 percent up in the retro market, helping in turn to support increased rates in the Florida renewal.
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The reinsurer is looking to pay more rate to secure retro cover in a tightening market.
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The reinsurer has expanded its retro sidecar by more than a quarter from the previously estimated size of $531mn.
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Gregory Murphy believes cedants have too little information about reinsurers’ exposure to the retro market.
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The reinsurance fund has ramped up in recent years to $700mn-$800mn.
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A drought of retro cover may bolster Florida rate demands, sources suggest.
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The fund’s ordinary shares added 0.85 percent during the month.
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The reinsurer’s non-life combined ratio deteriorated to 97.7 percent despite an improvement in P&C results.
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The sidecar was established in 2017 to provide support for Hamilton Re’s reinsurance portfolio.
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The new cat bond lite transactions include an unusual collateralisation feature for second-event covers.
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New aggregate demand from Japanese cedants may also present opportunities for ILS markets.
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The US Department of Justice, the Securities and Exchange Commission and Bermuda Monetary Authority are conducting inquiries into the firm’s ILS subsidiary Markel Catco.
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The insurer declined to comment on how much limit of the EUR1.75bn cover was placed.
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The insurer took a $179mn hit to its Q4 results from loss of goodwill.
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The carrier renewed its retro contracts and expanded its K sidecar to $640mn for 2019.
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The manager said it also expected currently attractive cat bond opportunities to dissipate later in 2019.
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Kevin O’Donnell, CEO of the Bermuda-based company, said he expected reinsurance rates to rise in later 2019 renewals.
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A key question is whether retro dislocation will spill over into reinsurance renewals.
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Newer vehicles found it harder to get going as sidecar sponsors struggled to hit their fundraising targets in the January renewals.
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The fund manager’s scarce capacity contributed to a generally difficult retro renewal at 1 January for buyers
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Looking ahead to the rest of the year and 2020, how likely is it that the industry will hold to its resolutions?
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Daniel Ohn has joined the reinsurer as an ILS structurer in New York.
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As less ILS capital was available at 1 January, retro rates rose by up to 35 percent on loss-hit deals, the broker said in its 1st View report.
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The broker’s global catastrophe rate-on-line index showed property reinsurance rates fell by 1.2 percent at 1 January.
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Analysts welcome offer of redemption share class but say timeframe for realisation is unclear.
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Regulators are currently investigating the beleaguered retro manager’s loss reserving.
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Eden Re provided $300mn of retro support for Munich Re in 2018 across a couple of debt issuances.
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The Latin American investment bank has backed the ILS start-up to launch a new low volatility fund in 2019.
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The vehicle is a first for an Asia-based cedant.
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