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Captive-Trends 2018

Captive Insurance Issues and Trends 2018

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ILS Records "Shattered" in 2017, According to Swiss Re Report

Shattered-SF
February 05, 2018

According to the latest Swiss Re Capital Markets (SRCM) Insurance-Linked Securities Market Update, 2017 produced groundbreaking records for the insurance-linked securities (ILS) market. While the first half of the year was "record-shattering" with $8.4 billion of ILS issuance, the second half of the year was strikingly quiet with a mere $2.13 billion of issuance. The entire year's issuance surpassed $10 billion while the outstanding market reached a year-end record of $27 billion.

The SRCM report said that amid a summer and fall filled with catastrophic events, "investors endured the onslaught, all the while displaying immense fortitude and demonstrating the discipline and importance of alternative capital to the re/insurance market."

Likewise, SRCM stressed that the "unrelenting barrage of catastrophic events in the second half led to increased volatility and large bond price swings, especially on bonds with aggregate triggers. The anticipated losses arising from these events served to halt the years' long spread-tightening trend that seemed to have no floor. Some had forecast a capitulation of alternative capital and a return to pricing of 5 years prior. However, the investor community was largely able to shore up its capital base and displayed a readiness to reinvest in upcoming transactions, albeit at improved terms."

SRCM expects ongoing price adjustments and, going forward, predicts a healthy ILS market ready for fresh issuance and uninterrupted use of the ILS market's capacity.

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