Trading Risk April 2019

ILS managers are upping the pressure on Florida reinsurance buyers to change terms and conditions or retain more risk as 1 June renewal negotiations continue.

Market participants have welcomed Lloyd’s plans to attract ILS capital but emphasised that cost reductions will be key to making them work.

A tighter cat bond market persisted into the first quarter of 2019, with new issuance activity expected to remain subdued heading into the hurricane season.

Returns from ILS funds tracked by Trading Risk fell to an average Q1 return of 0.63 percent to 0.65 percent in cat bond and multi-instrument funds.

Shortfalls in retro capacity are not impacting all vehicles, said Tangency Capital co-founder Michael Jedraszak.

ILS investors were more frustrated by extended loss creep last year than by the overall hit, according to Michael Knecht of Siglo Capital Advisors.

Cat bond investors are being more careful in assessing where to put their funds after recent losses, Aon Securities CEO Paul Schultz said at Trading Risk’s ILS conference in London this month.

It is “probably one of the best times to invest” in ILS, according to Leadenhall Capital Partners CEO Luca Albertini.

The life settlement industry is looking to attract ILS capital but many industry practitioners are reluctant to enter the space due to concerns over valuations, returns and the sector’s past reputation for unscrupulous practices.

Both primary and reinsurance segments incurred losses for the ILS syndicates operating at Lloyd’s in 2018.

LGT’s rated vehicle reported an income of $1.7mn in 2017

The ILS market has been talking about being on the cusp of making inroads into insurance risks for a few years now.

Reinsurers avoided another lacklustre renewal season with loss-affected business in Japan, the US and the retro market attracting rate rises.

Emmanuel Modu, global head of ILS at AM Best, says Bermuda insurers and ILS managers are increasingly showing interest in rated vehicles.

People moves in the industry in the past month.