News review | May 15 2018

The Texas Windstorm Insurance Association (TWIA) is returning to the catastrophe bond market with a fourth transaction in its Alamo Re series of deals, a $300m or greater multi-peril cat bond. This fourth cat bond from TWIA is the insurer's second that will transfer both Texan named storm risks and severe thunderstorm risks to the capital markets. It is understood the reinsurance protection that TWIA will benefit from is on an indemnity and annual aggregate basis.

Travelers has increased the target size of its new Long Point Re III cat bond to $300m-$500m, after initially launching the ILS deal at $300m. Pricing on the deal has dropped to 275-300 basis points (bps) from 300-350 bps – a decrease of 12 percent taking the midpoints of the ranges. The per-occurrence bond provides cover against tropical cyclones, earthquakes, severe thunderstorms and winter storms.
Trading Risk

Zurich Insurance has agreed a longevity swap deal to cover more than two billion pounds ($2.71 billion) of pensioner liabilities for the UK National Grid. The Swiss insurer has reinsured a “significant proportion” of the swap with Canada Life. “The policy will provide increased certainty on the cost of providing current benefits, which will therefore reduce the funding risks faced by the Group Trustee and National Grid in the future,” said Jon Carlton, chairman of the trustees of the Electricity Supply Pension Scheme.

Prudential and Pension Insurance Corporation (PIC) have completed their sixth longevity reinsurance transaction since 2015, with Prudential assuming the longevity risk for $1.2 billion in pension liabilities. The two firms concluded their last longevity reinsurance agreement in November 2017. Overall, they have come to agreements collectively worth more than $6 billion.

Fitch Ratings is maintaining its negative outlook on the global reinsurance sector, given intense market competition, the influx of alternative capital that continues to pressure pricing and persistently low investment yields that strain reinsurer profitability. However, ratings for the global reinsurance sector remain stable, as strong capitalisation of most rated entities should allow the rating agency to affirm the majority of its ratings over the next 12 to 18 months.
Fitch Ratings

Nearly 1,000 homes are thought to be affected by lava flows from the Kilauea volcano in the high-risk area of Hawaii's Big Island, which is primarily in Leilani. The average value of homes in the high-risk area is more than $230,000 with an aggregate valuation of $239m, according to CoreLogic. There are roughly 5,900 homes in the broader area that could also be at some level of risk.
Insurance Journal

Severe April storms resulted in a $2 billion hit to the US economy, according to Aon Benfield's Impact Forecasting. Five separate storm systems caused severe thunderstorms across the US during the month, the strongest of which affected the Plains, Midwest, Southeast, Mid-Atlantic, and the Northeast, with nearly 70 tornado touch-downs and up to baseball-sized hail that damaged residential and commercial property and vehicles. Total combined economic losses were estimated at $2.3 billion, with public and private insurers expected to pay at least $1.5 billion in claims.
Aon Benfield

Posted: Monday, May 14th, 2018