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Record-Breaking Insurance-Linked Securities Issuance Continues

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August 01, 2017

Willis Towers Watson Securities reported in the July 2017 ILS Market Update—At a Crossroad that, continuing the trend from the 2017 first quarter, non-life insurance-linked securities (ILS) issuance reached a record-breaking $6.3 billion in Q2 2017. ILS assets under management also continue to grow alongside fierce competition from investors.

After a better-than-average issuance volume in the first quarter, the second quarter of 2017 saw $6.3 billion of non-life catastrophe bond capacity issued through 36 tranches, compared with $1.0 billion issued through 17 tranches in Q2 2016 and the previous quarterly record of $4.5 billion issued in Q2 2014. Q2’s record issuance volume was driven by two of the largest ever catastrophe bond transactions—Kilimanjaro II Re 2017–1 and Ursa Re 2017–1. At quarter end, bonds provided $24.7 billion outstanding, up 16.5 percent year-on-year.

This is against a backdrop of the soft market, which sees some traditional reinsurers generating reduced equity returns; government yields in Europe and Japan remaining negative; and material uncertainties, such as Brexit and potential changes to the US tax environment, all causing concern to insurers and investors alike.

The combination of these factors, the report suggests, are leading to the ILS market reaching a positive tipping point as it manages a larger share of the world’s peak catastrophe risk, and plenty of opportunities remain for new issuance in non-peak catastrophe and across the property, casualty, life, and health spectrum.

Bill Dubinsky, head of ILS at Willis Towers Watson Securities, said, “The market has possibly never been in such robust health, with record breaking issuance and competition continuing to increase among ILS fund managers. I believe this will create the conditions for significant innovation and development so that the benefits of the ILS product extend beyond peak property cat, where it may already be the preferred choice, and out across the wider insurance industry.”

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