In a recent review conducted by Insurance Capital Markets Research (ICMR), the ‘RISX’ equity index, representing listed companies with businesses in the Lloyd’s market, has showcased robust annual returns for the year 2023.
Investors have shown a renewed appetite for the sector, with the Global Specialty (Re)Insurance sector registering a favourable performance, outperforming a basket of broader investment market sectors.
The ‘RISX’ index, which is premium-weighted rather than market capitalisation-weighted, has demonstrated strong annual returns, positioning it favourably against various other market sectors.
The chart comparing the share price gains or losses for major sectors reveals that the Global Specialty (Re)Insurance sector has not only secured notable returns but has also displayed lower correlation, indicating a more resilient and less volatile market.
Further analysis of the index composition underscores the sector’s ability to generate substantial returns with lower risk, as measured by the annualised risk from the daily volatility of capital markets pricing.
While the Global Specialty (Re)Insurance sector may have secured the fourth-largest mean return in 2023, its risk profile remained notably lower, pointing towards capital markets’ confidence in the sector’s stability.
Despite the global uncertainties faced in 2023 and carrying into 2024, confidence in consistent returns from the Global Specialty (Re)Insurance sector appears unwavering.
This sentiment is reinforced by the ‘RISX’ index data, which indicates that the sector experienced the lowest maximum drawdown among various sectors in 2023, notably around the collapse of SVB and Credit Suisse in March of the same year.
The data suggests that capital markets are potentially factoring in the sustained rate improvements witnessed over the past few years, as well as the impact of higher risk-free rates on the asset leverage enjoyed by specialty (re)insurers on their balance sheets.
This optimistic outlook is expected to bode well for any Initial Public Offerings (IPOs) planned in the upcoming quarters within the Global Specialty (Re)Insurance sector.
