Non-life catastrophe bond issuance in the fourth quarter of 2014 totalled
"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
Looking ahead to 2015
Against the backdrop of a reinsurance market reshaping, the WCMA report notes that although issuance is set to rise, market dynamics in 2015 are less predictable.
Commenting on this outlook,
The report highlights three key trends to look out for:
Trend 1: Catastrophe bonds continuing to mirror 2014 collateralized reinsurance
2014 saw the extension of many terms and conditions from the collateralized reinsurance market to the catastrophe bond market. "2015 may see further extensions, including for indemnity-trigger retrocession deals," according to
Trend 2: Falling spreads and growing assets under management ("AuM")
"In the absence of any major market moving events we expect spreads to decline and AuM to grow," said
However, the report also outlines that the rates of both decline and growth are likely to flatten. "As a reaction, some investors will reach for yield and accept more risk while others may lean towards more transparent risk transfer with modest expected returns,"
Trend 3: Large reinsurance buyers challenging the status quo
"Large ceding companies are now active users of the capital markets via catastrophe bonds, collateralized reinsurance and sidecars but some have seemingly reached a plateau in their ILS strategies under current conditions," according to
The report notes that companies could move significantly more of their reinsurance to both aggregate coverage and over a much longer term, for example of up to between seven and ten years. "The capital markets can support both these features,"
The WCMA ILS report, Reaching New Heights, provides detailed breakdowns, charts and insight into the ILS market. Download here.
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Laura Molloy+44 20 3124 8555 Email: Laura.Molloy@willis.com Investors: Peter Poillon+1 212 915 8084 Email: Peter.Poillon@willis.com
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