Insurance-Linked Securities Market Could Be Set for Significant Growth

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September 22, 2021 |

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The insurance-linked securities (ILS) market appears poised to set another single-year issuance record this year and could be set for significant expansion, according to Fitch Ratings.

In a new report, Insurance-Linked Securities—A Year in Review (Expansion Breakout Possibility Emerges), September 17, 2021, Fitch said it views the ILS sector as strong and viable. Investors remain committed to the market, the rating agency said, reinvesting maturing ILS proceeds and providing additional capital that set a record level of property-related issuance of more than $11 billion in 2020.

With more than $8 billion in new issuance during the first half of 2021, the insurance-linked securities sector is poised to reach another record this year, Fitch said.

"The pipeline of existing and new sponsors is robust including several novel sponsors looking to expand their property protection against natural catastrophes," a Fitch statement said. "In addition, new risk perils linked to mortality of financial guaranty were placed at modest amounts. Notes linked to mortgage insurance continue their rapid expansion with over $4 billion of placement in 2020."

Fitch said that as reporting standards coalesced, environmental, social, and governance (ESG)-branded catastrophe bonds could provide a catalyst for future ILS market growth.

September 22, 2021