Insurance Linked Securities’ Issuance Reaches Record $1.6B in Q3: Willis Re

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The issuance of non-life insurance linked securities during the third quarter reached a record $1.6 billion, according to a report published by Willis Re.

The total exceeds the former Q3 record of $1.4 billion achieved in 2013, and is well ahead of the five-year average of $800 million, said Willis Re’s ILS Market Update.
The report said that this year’s total exports – up to September 31st – are already at $ 8.7 billion, due to an annual record level of $ 9.7 billion, or even exceeding the year.

In the report, the $ 1.6 billion issued in the previous quarter will be $ 200 million in peak protection and US $ 650 million in earthquake protection said. The remainder includes $ 500 million new dangers from floods from the US wind and $ 200 million that protect California forest fire responsibility.

Less Index, Parametric Triggers
The report stated that the market continues to act from the index triggers (including the parametric triggers) by choosing compensation-based structures. In 2018, over 60 percent of unpaid issuances were triggered by the issuer’s own losses, reaching only 40 percent in 2008.

The report noted that the current premium or risk-spread discount for instruments triggered by the index fell in relation to indemnity triggers, and that the share of transactions triggered by the index decreased as a result, which is a good news story. Index reflects improved data, transparency and understanding of compensation risk rather than any inconvenience related to triggers.

However, it is stated in the report that the index triggers are particularly important for stretching cat ties and industrial damage guarantees (ILWs). In the report, where the quality of data is insufficient or coverage is extremely difficult to put into the model, index triggering reductions often increase considerably, and natural disasters and extreme mortality rates in recent governments make structures more attractive, as seen by ILS agreements.

While it is likely that the tendency to move away from anti-indemnity persists, it remains important for some operations, while William Reinsky, chairman of the board, and Willis Re, president of the ILS.
. As insurance, reinsurance and ILS markets work together to solve new problems for insurance companies, index triggers are a very useful tool to consider, Dub Dubinsky said.

Ler Closing the global protection gap, not seriously expanding the ILS market, or solving all the ugly problems, but with creativity, impartial advice and constant effort, they can still have a significant impact, “he added.

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