15 January 2015ILS

ILS set to reach new heights in 2015

As an insurance-linked securities (ILS) hub, Bermuda will benefit from another good year as ILS issuance is set to reach new heights in 2015.

This is according to the latest ILS report from Willis Capital Markets & Advisory (WCMA), which explained that investor interest in insurance catastrophe risk is continuing to grow.

Non-life cat bond issuance in the fourth quarter of 2014 totalled $2.1 billion, capping the record year which saw over $8 billion of non-life cat bonds issued.  The previous record-breaking high was $7.2 billion in 2007.

Tony Ursano, chief executive officer of WCMA, said: “As investors become more sophisticated, any coverage gaps between reinsurance provided by traditional rated reinsurers and that provided by investors is shrinking – 72 percent of catastrophe bonds used indemnity triggers in 2014, only 30 percent used such triggers in 2007.

“It took over seven years to break 2007’s ILS issuance record. In the current climate there are no signs of growth abating and we could very easily see two consecutive record-breaking years. We would not be surprised to see $9 billion of issuance in 2015.”

Against the backdrop of a reinsurance market reshaping, the WCMA report noted that although issuance is set to rise, market dynamics in 2015 are less predictable.

William Dubinsky, managing director and head of ILS, WCMA, said: “For some, predictable may be good but uncertainty creates opportunity for those who are prepared to act.”