31 July 2017
Reporter: Becky Butcher

Record breaking figures for non-life ILS issuance

Non-life insurance-linked securities (ILS) issuance reached record highs of $6.3 billion in Q2 2017, continuing the trend from Q1 this year, according to a Willis Towers Watson report.

With a better-than-average issuance volume at the start of 2017, Q2 saw a total of $6.3 billion in non-life catastrophe bond capacity issued through 36 tranches, compared to £1 billion issued through 17 tranches in the same period last year.

The report suggested that Q2’s record issuance volume was driven by two of the largest ever catastrophe bond transactions, Kilimanjaro II Re 2017-1 and Ursa Re 2017-1.

It found that at quarter-end, bonds provided $24.7 billion outstanding, up 16.5 percent year-on-year.

According to the report, the current soft market has seen some traditional reinsurers generating reduced equity returns, government yields in Europe and Japan remaining negative, and material uncertainties, such as Brexit and potential changes to the US tax environment, causing concern to insurers and investors alike.

The report said that the combination of these factors is leading to the ILS market reaching a “positive tipping point as it manages a larger share of the world’s peak catastrophe risk”.

It added: “Plenty of opportunities remain for new issuance in non-peak catastrophe and more generally across the property, casualty, life and health spectrum.”

Bill Dubinsky, head of ILS at Willis Towers Watson Securities, said: “The market has possibly never been in such robust health, with record-breaking issuance and competition continuing to increase amongst ILS fund managers.”

Dubinsky added: “I believe this will create the conditions for significant innovation and development so that the benefits of the ILS product extend beyond peak property cat, where it may already be the preferred choice, and out across the wider insurance industry.”

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