A seasonal round-up of the big stories of¬†2015. Happy holidays.
On the twelfth day of Christmas, my true love sent to me...
As predicted by Tim Hall and others, Atlantic¬†storm activity was slightly below the long term average. None of the storms were sufficiently bad to affect the reinsurance market. The relatively low¬†level of property damage included over $500m of damage from Erika in Dominica, and $60m of damage from¬†Joaquin in the Bahamas and Bermuda.
The twelve were: Hurricanes¬†Danny,¬†Fred,¬†Joaquin and Kate; Tropical Storms Ana, Bill, Claudette, ¬†Erika, ¬†Grace, Henri, and Ida plus Tropical Depression Nine.
On the Pacific coast,¬†Hurricane Patricia broke several records and is likely lead to¬†the only catastrophe bond default in 2015.
Guy Carpenter's benchmark¬†index showed that global catastrophe reinsurance rates had fallen by 11.2% by the middle of the year. Rate reductions seem to have continued for the January¬†1 2016 renewals though some parts of the market are showing resistance.
There was no shortage of new (re)insurance funds in 2015. Hudson,¬†Entropics, Sequant, Redmond and Lombard Odier were all looking for investors who are attracted to the insurance industry's return characteristics, while Enstar/UBS O'Connor, ACE/Blackrock, XL Catlin/Oaktree, Axis/Blackstone¬†and¬†Aspen/Goldman explored¬†ways to create investment vehicles that combine¬†insurance cash flows with¬†investment returns.
Nine mergers and acquisitions¬†
One effect of current market conditions has been a glut of M&A activity,¬†including: Renaissance/Platinum, Mitsui/Amlin, Exor/Partner, XL/Catlin, Endurance/Montpelier, Fairfax/Brit, China Minsheng/Sirius, ACE/Chubb¬†and Markel/CATCo.
Eight percent AUM growth
The AUM of the largest asset managers tracked by InsuranceLinked¬†grew by a little under 8.5%¬†to $49 billion in the 12 months to June 30 2015. This compares to an average of 35% per year since the beginning of 2010. Sirius, Third Point and AQR exited the reinsurance fund business while others grew significantly. Access to retail/high net worth investors¬†continued to be a theme amongst the fastest growing funds.
Seven¬†billion dollars of new cat bonds
Catastrophe bond issuance¬†is already over $7 billion in 2015 and could end the year closer to $8 billion. This is about the same level as in 2013 but considerably below last year's $8.9 billion of new issues.
A sign of the increased interest in the sector is¬†the increasing number of ILS conferences each year. Key events this year included:¬†Convergence 2015 (Bermuda) - link to live blog, SIFMA (New York), Rendez Vous (Monte Carlo), ILS and Cat Bonds Australasia (Sydney),¬†Trading Risk (New York) and PCI (Hollywood, Florida)
Many other reinsurance and investor events attracted significant interest from the alternative reinsurance industry including Reinsurance Meeting (Baden Baden), NAMIC (San Diego) and RIMS (New Orleans).
Five thousand users
InsuranceLinked had close to 5,000¬†users in October and November 2015. There were 64% more users in the 12 months ending¬†November 30 2015 than in the same period the year before. We appreciate¬†your support. Advertisers can contact firstname.lastname@example.org for information about marketing opportunities.
According to the Swiss Re Global Cat Bond Performance Index, cat bonds returned 4.2% in the 12 months to December 18.¬†This compares to 6.0% in 2014 and 10.9% in 2013. This includes the market's view of the fate of MultiCat Mexico C (a total default would impair the market by less than 0.5%).
The weaker euro meant that the unhedged version of the index returned 3.4% in the 12 months to December 18¬†(compared to 4.4% in 2014 and 11.5% in 2015).
The new world is embracing the old with 'alternative' reinsurers making increased use of 'traditional' structures. Credit Suisse¬†launched Humbolt Re a¬†CHF500m, 'A-' rated carrier. Credit Suisse also launched a Lloyd's vehicle (Arcus Syndicate 1856) as did Securis (SPS 6129 with Novae).
Two fronting carriers
Pressure to expand from¬†reinsurance into insurance has prompted the creation of Clear Blue¬†and¬†Spinnaker. Both were successful in gaining AM Best 'A-' ratings.¬†Nephila too¬†found new ways to access insurance business with the creation of an MGA called 'Velocity Risk Underwriters'.
And a big new reinsurance company
The challenging market¬†didn't stop Fidelis completing one of the industry's largest ever fundraises¬†to create a new, $1.5 billion, 'A-' rated reinsurance company.
Posted: Monday, December 21st, 2015