Best’s Market Segment Report: ILS Capacity Grows Modestly, as Catastrophe Bond Issuance Breaks Record
19 Agosto 2024 - 2:00AM
Business Wire
The capacity level in the insurance-linked securities (ILS)
segment continues to grow at a modest pace, mostly aligning with
market demand as opposed to exceeding it, according to a new AM
Best report. In addition, AM Best estimates the property
catastrophe bond market at approximately USD 45 billion at mid-year
2024, which represents growth of USD 3 billion.
The Best’s Market Segment Report, “ILS Capacity Grows, as CAT
Bonds Issuance Breaks Record,” is part of AM Best’s look at the
global reinsurance industry ahead of the Rendez-Vous de Septembre
in Monte Carlo. Other reports, including AM Best’s annual ranking
of the Top 50 global reinsurance groups and in-depth looks at the
life/annuity, health, Lloyd’s and regional reinsurance markets,
will be available during August and September.
At year-end 2023, Guy Carpenter and AM Best together estimated
the capacity of the ILS market at approximately USD 100 billion.
ILS capacity increased by mid-year because capacity from maturing
deals was recycled into 2024 transactions, some capital created out
of the record-breaking 2023 earnings was deployed, and a modest
amount of new capacity entered the space, according to the
report.
“One year of great returns is probably not enough to draw in
material amounts of new capacity that would significantly soften
the market,” said Emmanuel Modu, managing director,
insurance-linked securities, AM Best.
The report also notes that the 144A property catastrophe bond
market broke its single quarter issuance record in second-quarter
2024, with issuance of nearly USD 8 billion, beating the record set
just last year. Total issuance volume for 144A property catastrophe
bonds hit USD 11.9 billion in first-half 2024. Growth is coming
from both new sponsors and renewal deal upsizing, according to the
report.
Risk-adjusted rate changes in the ILS segment were flat to
slightly down overall at mid-year renewals. Rate decreases in the
more risk-remote layers of reinsurance towers were more pronounced,
but rates tended to rise slightly at the lower layers of the tower,
where capacity is scarcer. The dampened rate activity was not
unexpected given the strong returns achieved by traditional
reinsurers and ILS managers in 2023, as well as the lack of a major
peak-peril catastrophe event since Hurricane Ian in 2022.
“Barring a major peak peril loss event in 2024, cedents will
have more room to negotiate at the Jan. 1, 2025, renewal season,”
said Wai Tang, senior director, insurance-linked securities, AM
Best. “However, capacity providers are highly motivated to maintain
discipline because the poor returns of recent years are still fresh
in their minds.”
To access the full copy of this market segment report, please
visit
http://www3.ambest.com/bestweek/purchase.asp?record_code=345768.
For future global reinsurance reports ahead of Rendez-Vous de
Septembre, please visit Best’s Research.
Lastly, AM Best will host its annual reinsurance market briefing
at Rendez-Vous de Septembre on Sept. 8, 2024, at 10:15 a.m. (CEST)
in Monte Carlo. For more information, please visit
http://www3.ambest.com/rd/rd.aspx?rd=RVDS2024.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London,
Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more
information, visit www.ambest.com.
Copyright © 2024 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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Emmanuel Modu Managing Director,
Insurance-Linked Securities +1 908 882 2128
emmanuel.modu@ambest.com Wai Tang, Ph.D. Senior
Director, Insurance-Linked Securities +1 908 882
2388 wai.tang@ambest.com Edem Kuenyehia Director,
Market Development & Communications +44 20 7397
0280 edem.kuenyehia@ambest.com Christopher Sharkey
Associate Director, Public Relations +1 908 882 2310
christopher.sharkey@ambest.com