The Insurance Linked Securities (ILS) market underwent further growth in 2018, reaching $93 billion of outstanding non-life capital, according to an ILS Market Update from Willis Re.
With roughly $9.2 billion of new capital delivered – the second most active calendar year ever despite a slow-down during the final quarter – non-life cat bond issuance remained strong.
Of $535 million in bonds issued during Q4, $125 million provides protection from California wildfire liability, $200 million grants peak multiperil protection, and $210 million covers U.S earthquake (workers’ comp).
Furthermore, Willis Re states that lines of separation within the ILS space are blurring as ceding companies and intermediaries look to the range of cat bonds, sidecars, and other collateralized ILS, to identify the best tools to meet their needs.
“We are seeing the convergence of convergence,” says William Dubinsky, Managing Director & Head of ILS at Willis Towers Watson Securities.
“The overall ILS figure is today a much more meaningful measurement of market size than focusing on cat bond and sidecar issuance alone.”
This blurring of categories should help the ILS market overcome challenges including prompt loss reporting, valuation accuracy, collateral release and rollover, and increasing volatility, the report contends.
Willis Re says two-way transparency both for ceding companies and investors is key, and solutions to many specific challenges seem close at hand.
“ILS capacity and products are growing organically and dynamically as gaps between different products and subsectors fill in, and innovation and market necessity create new capacity and products,” adds Dubinsky.
“Our confidence in the speed that new solutions will emerge gives us a favorable outlook for ILS in 2019.”
