The UK Government's bid to make the country an international hub for insurance-linked securities has been widely welcomed. The plans to develop a new competitive corporate and tax structure for ILS were announced by Chancellor George Osborne's budget speech on 18 March. They are likely to help London maintain its leading position as a global reinsurance hub, according to Fitch Ratings, and reinforces the view that alternative reinsurance has become a permanent fixture in the market.
Tokio Marine's latest Kizuna Re catastrophe bond has increased by 40% to reach a 35bn yen ($290m) target, as it became the first non-life ILS transaction in seven years to gain a preliminary investment grade rating of BBB- from Standard & Poor's (S&P). A 2008 Vega Re transaction from Swiss Re included some investment-grade tranches, as did a 2007 Merna Re issuance from State Farm.
Louisiana Citizens is returning to the catastrophe bond market for the third time with a new SPI vehicle to sponsor a $100m or greater Pelican III Re Ltd (Series 2015-1) indemnity bond. The bond will cover named storm risks in the State of Louisiana over a three-year term.
Munich Re is returning to the capital markets with Queen Street X Re 2015, looking to cede $100m-plus of Australian cyclone and US hurricane liabilities. Last year Munich Re offered a similar deal to the capital markets but pulled it in June when the target size was not attained.
More and more UK pension schemes are being tempted to look for alternative assets to invest in, which are often more risky and illiquid, including infrastructure bonds, direct corporate loans, catastrophe bonds and emerging market debt. Speakers and delegates at a National Association of Pension Funds conference found British pension funds are coping with low bond yields and high share prices by seeking alternatives. "In a world where bonds are yielding inflation minus one percent, if you can get something which yields a bit more than that, it's the way to go," said Chris Hitchen, chief executive of railway pension fund RPMI.
Early results of a cat modelling study presented at the third UN World Conference on Disaster Risk Reduction in Sendai, Japan, show little prospect of reducing economic losses from present levels of $240bn per year. Dr Milan Simic, managing director of international operations at AIR Worldwide, said this figure is expected to triple to $750bn over the next 15 years if the risks are not better managed by governments across the globe.
UN Office for Disaster Risk Reduction
Guy Carpenter has launch a casualty catastrophe model. GC ForCas is to help insurance carriers better understand their exposure to casualty catastrophe losses resulting from the accumulation of US commercial lines insurance policies.
Aon Benfield's Impact Forecasting is applying a Computational Fluid Dynamics software to its understanding of blast zones. This is an approach used by the New York Police Department and federal security agencies and takes into account a number of nuances that are absent in current blast analysis that can have a substantial impact on the losses.
The World Bank has called for a rapid insurance payout to the government of Vanuatu under the Pacific Disaster Risk Financial Insurance Program. Category 5 Cyclone Pam left devastating impacts across Vanuatu on 13 and 14 March. One of the most intense tropical storms on record, latest estimates suggests over 90% of the properties in the capital Port Vila have been destroyed or damaged.
Posted: Monday, March 30th, 2015