In this article from The Insurer, Lara Mowery, Global Head of Distribution, indicates how there was some impact on capacity from lower-than-expected mid-year fundraising in the insurance-linked securities (ILS) sector.
Lara suggested that the desire of ILS funds to lock in gains and show positive momentum after strong 2023 results was a more significant driver in market behavior late in the mid-year renewal cycle than were forecasts for an active hurricane season.
“So, it was more of a capital management dynamic, with maybe some view of a bit of caution due to the hurricane season forecast,” she explained.
Lara continued to address dynamics in the ILS sector that have seen catastrophe bonds favored as a way to access the attractive returns that have been on offer after last year’s major shift in the catastrophe reinsurance market.
“ILS investors still weren’t coming in in force to pile a bunch of external money into the (traditional) sector, but at the same time, (they were) looking at ways they could participate in the space and in increased pricing and more attractive returns,” she explained. “The cat bond sector is an easier way for them to do that. It’s got a component of liquidity to it that traditional reinsurance doesn’t have, and it’s also got a very defined risk profile for each cat bond that’s offered.”
Regarding overall reinsurance buyer interest, Lara said additional demand at mid-year was “substantial.”
“What’s striking as we’re going through our portfolio of January through July renewals to do the analysis, is that dozens and dozens of buyers that bought USD 50 million more, USD 100 million more, USD 200 million more,” she said. “Those don’t make the headlines, but they add up to quite a significant amount of additional capacity purchased.”