News review | December 07 2015

Swiss Re has returned to the cat bond market after a two-year hiatus to launch an extreme mortality bond. The $100m Vita Capital VI bond will provide Swiss Re with protection against extreme mortality events. It covers what is believed to be a new combination of regions for the Vita series: Australia, Canada and the United Kingdom.
Trading Risk

ILS funds experienced their third-worst October since records began in 2006, as the group of funds tracked by the Eurekahedge ILS Advisers Index recorded an average gain of 0.26 percent for the month. Pure cat bond funds were hit by an anticipated $100mn loss to the MultiCat Mexico bond, which has been heavily marked down, although the sum of the payout is not yet known.
Eurekahedge ILS Advisers

The Financial Policy Committee of the Bank of England has asked the bank to review the potential for risks to arise from ILS, cat bonds and alternative reinsurance capital in the first half of 2016, as these practices can "create connections between insurance risks and other financial intermediaries.
Bank of England

African risk pool, the African Risk Capacity (ARC), has announced it will double its insurance coverage through a new replica coverage initiative. The initiative will allow international organisations, such as United Nations (UN) Agencies, and non-governmental organisations (NGOs) to take out policies that match those already provided directly to African governments, expanding each country’s coverage.
African Risk Capacity

The United States will contribute $30m to climate risk insurance schemes in the Pacific, Central America and Africa, President Barack Obama announced at a meeting with leaders of small island nations in Paris on Tuesday. This includes ARC, the Pacifica Catastrophic Risk Assessment and Financing Initiative and the Caribbean Catastrophe Risk Insurance Facility. The US Department of State said the money was part of a broader set of actions to help vulnerable people become more resilient to climate change.
US Department of State

AM Best has published a report offering its view on cyber security and insurance companies. While the rating agency "still considers natural catastrophe losses to be the primary threat to the financial strength and credit quality of property/casualty insurers, the increasing frequency and severity of cyber attacks, and difficulty in measuring the risk, pose a substantial threat to the insurance industry," it notes, adding that total realistic probable maximum loss for cyber-security risk globally is currently approximately $31 billion. The rating agency is analysing cyber-security exposure in an effort to increase awareness of this threat and assess the impact on an organisation's financial strength.
AM Best

Aon Benfield and SCOR have together developed a French flood model which will quantify losses for historical and hypothetical flood scenarios for the cities of Paris, Lyon and Toulouse to help the firms' clients improve their view of cat risk in these areas. Since 1980, France has annually averaged over $500m in economic losses from flood, ranking it as the second-costliest peril after windstorm.
Aon Benfield

Posted: Monday, December 7th, 2015