A renewal catastrophe bond transaction has been launched for a novel parametric deal that ultimately provides workers compensation protection to an insured, with a $300m Acorn Re Ltd. (Series 2018-1) transaction that seeks parametric earthquake cover that will benefit the Kaiser Permanente health group. Hannover Re is again acting as the ceding reinsurer, sitting in front of one named ceding insurer, Oak Tree Assurance Ltd, a Vermont-domiciled workers compensation captive owned by the Kaiser Permanente group of health plan companies.
JLT Re unit Jardine Lloyd Thompson Capital Markets (JLTCM) has completed the placement of catastrophe bond Oak Leaf Re 2018-1, which closed at $45.26m. This new Oak Leaf Re cat bond follows the triggering of the Oak Leaf Re 2017-1 transaction, after Southern Oak’s losses from hurricane Irma triggered that transaction.
The momentum for rate increases on non-loss impacted accounts has dissipated at the June and July property catastrophe renewals, according to Willis Towers Watson. Among the drivers it identifies excess capital leading to a surplus of capacity from both traditional and insurance-linked securities (ILS) markets and the benign loss activity for the first half year 2018 to date.
Willis Towers Watson
After meetings with seven re/insurers (Arch, Axis, Hiscox, Nephila, PartnerRe, RenRe, and Third Point Re), Morgan Stanley has indicated that, in absence of large, unexpected losses or significant industry reserve issues, there’s potential for further pressure at the key January 2019 renewals. Underlining disappointing pricing at recent renewals, Morgan Stanley stated that, following a record $140bn+ of catastrophe losses in 2017 and approximately 50% cumulative rate reduction in the last five years, property catastrophe rates increased a modest +5%.
Canada’s financial regulator, the Office of the Superintendent of Financial Institutions (OSFI), has called on insurers to conduct “a commensurately higher level of due diligence” on reinsurers, and particularly of those using ILS. “A reinsurer that transfers the risks it assumes to investors, via ILS, may have a very different risk profile relative to a traditional reinsurer,” it said in a discussion paper published this month on OSFI’s reinsurance framework.
Reinsurance market M&A activity persists as profit and growth challenges, according to Fitch Ratings. Two significant reinsurance entity deals were announced thus far in 2018, and similar tie-ups may follow. Several market reports indicate that Aspen Insurance has recently launched a sale process. AXA’s sizable acquisition of XL Group for $15.3 billion is expected to close in 2018. This acquisition follows AIG’s January 2018 announcement that it will acquire Bermuda-based Validus for $5.6 billion, expected to close in mid-2018
PERILS AG has disclosed its third loss estimate for Extratropical Cyclone “Burglind”, also known as “Eleanor”. The event caused significant damage across Austria, Belgium, France, Germany, Ireland, Luxembourg, the Netherlands, Switzerland, and the United Kingdom between 2 and 3 January 2018. PERILS’ third estimate of the insured property market loss for Burglind is €724m, up from an earlier estimate of €680m.
Posted: Monday, July 2nd, 2018