The first catastrophe bond to transfer a portion of the National Flood Insurance Program’s (NFIP) risk to the capital markets will increase significantly in size, as the FloodSmart Re Ltd. (Series 2018-1) issuance is understood to have expanded to $500m, while pricing has dropped to the bottom of guidance during marketing. Being the first venture into the ILS market for the US Federal Emergency Management Agency (FEMA), as it seeks to broaden its sources of reinsurance to include ILS funds and capital market investors, the FloodSmart Re cat bond looks set to provide hard evidence of investor demand for US flood insurance risks.
PartnerRe has grown its Lorenz Re sidecar by $61m in its July renewal of the vehicle. The sidecar has now reached $195m in size. As well as upsizing the vehicle, PartnerRe had signed up 50 percent more investors during the renewal. Lorenz Re takes a quota share of catastrophe contracts covering the reinsurer’s largest counterparty relationships and has returned 14 percent on an annualised basis since its 2013 launch.
Deutsche Bank holds a negative outlook for January 2019 reinsurance renewals and does not expect pricing for July to gain significant momentum. The company cites an expectation that 2018 Q2 losses will be underestimated by the markets – despite a quiet quarter for natural catastrophe – while pricing data should support its view that reinsurers’ pricing power is gone.
Aon Reinsurance Solutions' organic revenue increased 8% in 1H 2018 compared to the prior year period, driven by net new business generation globally in treaty and strong growth in facultative placements, partially offset by a modest decline in capital markets transactions. The prior year quarter benefited from record catastrophe bond issuance during the mid-year renewal season.
Aon Reinsurance Solutions
The Federal Emergency Management Agency (FEMA) has warned of consequences if the US congress fails to reauthorise the National Flood Insurance Program (NFIP) that will expire on July 31, 2018. "As currently structured, the NFIP cannot handle catastrophic losses like those caused by the devastating hurricanes in 2017", said FEMA Administrator Brock Long in a statement.
Federal Emergency Management Agency
Global economic losses from natural disasters for 1H 2018 were estimated at $45 billion – 64 percent lower than the 10-year average of $124 billion, and 48 percent lower than the 18-year average of $87 billion, according to Aon Benfield's Impact Forecasting. Meanwhile, insured losses were preliminarily estimated at $21 billion – 40 percent lower than the 10-year average of $35 billion, and 19 percent lower than the 18-year average of $26 billion.
Posted: Monday, August 6th, 2018