July 2016/1

Assets under management (AuM) at the top 10 ILS funds grew by 7.7 percent in the half-year to 1 July, as growth accelerated from late 2015.

Retro capacity dried up towards the end of the mid-year renewals, as incremental new demand created a challenge for buyers that entered the market late in the day.

Is the ILS market feeling old before its time?

Schroders lifted its share in Zurich-based ILS manager Secquaero Advisors to a majority 50.1 percent earlier this year after buying up an additional 20.1 percent of equity.

The introduction of earthquake insurance in China for the retail and residential sectors offers the ILS market "huge potential," according to Secquaero's chairman Dirk Lohmann.

ILS funds have held talks to support a Lloyd's start-up led by former Cathedral Capital CEO Peter Scales, Trading Risk understands.

Cat bond spreads fell in response to sparse new issuance in the second quarter, but some market participants tipped that this could create a brighter outlook towards year-end.

Second quarter returns from a group of ILS funds tracked by Trading Risk were up year-on-year, despite the impact of catastrophe losses that have affected some private reinsurance strategies.

Risk-adjusted cat bond spreads recovered some ground in June as the ILS market earned incremental premium from higher-risk deals, according to RMS data.

Lloyd's has produced the highest average returns for catastrophe insurance investors since 2002, but the cat bond market has delivered better risk-adjusted performance, Lane Financial found in its Q2 report.

Florida Citizens Property Insurance placed under a quarter of its traditional reinsurance programme with collateralised markets this year, down from the third share taken by ILS funds in 2015.

Changes to AM Best's Capital Adequacy Ratio (BCAR) methodology could provide an impetus for US catastrophe-exposed carriers to seek additional tail risk and second-event reinsurance.

Axis Capital and Blackstone's joint venture Harrington Re has completed a $600mn capital raise and secured an A- rating from AM Best.

Mitsui Sumitomo Insurance is offering to issue cat bond protection on behalf of Japanese corporates, according to local media reports.

Hedge fund re model cracks; ILS rates gain 1.6%; US June storms cost $350mn; PCS cat index; Gen Re partners with TransRe; CSU lifts storm forecast; Gator Re value; China cat insurance

Brexit market volatility could give a minor boost of $1bn-$2bn to investor inflows into the ILS market, Fermat Capital Management co-founder John Seo said.

Lloyd's is pushing for a passporting system similar to what it has today in discussions with the UK government following the "Brexit" vote, CEO Inga Beale told managing agents last month.

Passporting rights will be crucial for UK ILS managers and bankers after the country voted to leave the European Union (EU), according to Robert Cannon, special counsel at legal firm Cadwalader, Wickersham & Taft.

Reinsurers need to evolve beyond the equity and debt structures of the past to succeed in the "new world order," said Everest Re chief underwriting officer John Doucette, speaking at the Trading Risk Convergence London conference on 16 June.

The alternative sector could lift its share of the cat market from just under 20 percent currently to more than a third by 2020, according to Michael Stahel, partner and portfolio manager at LGT ILS Partners.

Leadenhall Capital Partners and Amtrak were among the winners at the 2016 Trading Risk awards, which were held in London last month.

Greater transparency in the ILS industry would benefit cedants as well as investors, according to Eveline Takken-Somers, investment director at PGGM.

Reinsurer sidecars delivered average increases in fair value of 1.95 percent for the three months from February to April, down from a 2.5 percent average return posted in the same period last year, according to Trading Risk calculations.

Stone Ridge Asset Management reinvested a total of $172mn in various 2016 Sector Re issuances in April, up from $157.4mn pledged to the Swiss Re vehicle in 2015.

The Insurance Bureau of Canada (IBC) estimated that insured losses from the Alberta wildfires in May are likely to cost C$3.58bn ($2.76bn), coming in C$1bn lower than previous industry loss estimates from Property Claim Services.

News that Gator Re is almost 70 percent of the way to reaching its trigger point has put aggregate modelling back in the spotlight.