Over the last 12 months, the AUM of the leading reinsurance fund managers has fallen for the first time in 20 years. But the experience of individual funds has been extremely varied. Some have experienced large losses and/or redemptions whilst others have seen both positive returns and continued inflows.
In most years, the lack of US hurricane risk has meant positive returns for ILS funds in the first five months of the year. An exception was 2011 which experienced earthquakes in Japan and New Zealand in the first quarter. Despite a benign period of insurance losses, 2019 has gotten off to a bad start for the constituents of the Eurekahedge index. It is the second worse year on record due to continued loss creep and mark-to-market cat bond losses (following the higher spreads in the primary market)
According to figures from Guy Carpenter, the higher ILW rates that were seen at 1/1 have been maintained as the year has progressed. The Guy Carpenter ILW desk commented:
We witnessed material hardening in the ILW market throughout Q2 as demand outstripped supply. Aggregate protection was very difficult to secure whilst Nationwide Occurrence terms stiffened again during this period adding to the price increases that emerged at 1/1. Healthy volumes have nonetheless been traded despite increased cost. In recent days we have seen a slight reverse in this pricing trend as those with remaining funds to deploy perhaps take a commercial view that they have a reduced number of opportunities to put $ to work given July 1 has now passed.
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Posted: Monday, July 8th, 2019