US primary insurance giant State Farm has once again privately syndicated and quietly issued its latest catastrophe bond, a $300m Merna Re II Ltd. (Series 2019-1), securing the firm an expanded source of collateralised US earthquake reinsurance protection. The deal has been privately marketed to a select group of insurance-linked securities (ILS) funds and investors, using a syndicated approach but not marketed to the entire ILS investor community.
Hamilton Re has secured $65m of collateralised capacity through the issuance of the Series 2019-1 preference shares from its special purpose sidecar, Turing Re, in a syndicated private placement. Turing Re will provide support for Hamilton Re’s global property treaty reinsurance portfolio. Hamilton Re CEO Kathleen Reardon said it was significant the firm had managed to secure the capacity "amidst more uncertain conditions in the insurance-linked securities market".
French reinsurer CCR Re has launched the first ever Insurance-linked Securities (ILS) instrument governed by French law. 157 Re will assume a quota share of CCR Re’s worldwide property catastrophe portfolio, providing it with fully collateralised capacity to achieve its target of diversified and profitable organic growth. This strategic instrument will also provide CCR Re with full Solvency II regulatory credit and give it access to a new competitive and agile investor base.
Willis Towers Watson
California is mooting the creation of a new state catastrophe fund backed by tens of billions of dollars to provide cover for properties against wildfire risk. However, Carolyn Kousky, executive director of the Wharton Risk Management and Decision Processes Center at the University of Pennsylvania warned that California's wildfire risk is so great now that even risk pools or catastrophe bonds aren't attractive to investors.
The world's first hybrid vehicle for use in the ILS sector has been launched in Guernsey. The Guernsey hybrid is a protected or incorporated cell company that is both a licensed insurance company and a regulated investment fund, which means ILS managers do not have to 'rent' cells of protected cell or segregated account companies to act as Special Purpose Insurers (SPIs). According to Carey Olsen partner Christopher Anderson, the hybrid vehicle "provides managers with the opportunity to operate an investment fund and any number of sub-funds and SPIs in one place, supervised by one regulator, governed by one board of directors with one set of service providers and one auditor".
Reinsurers have adopted a rational rating approach at the 1 April 'Asian' 2019 renewal with price increases of up to 25% targeted towards loss-affected contracts and programmes. These rate increases were balanced by flat renewals for loss-free classes and programmes, according to Willis Re. James Kent, the broker's global CEO, noted that in the Japanese market, one of the largest buyers of catastrophe capacity outside the US, "the involvement of the ILS markets remained small, but unchanged, with some increase in appetite from funds in a few selected areas".
Willis Towers Watson
Forecasters at Colorado State University are predicting a slight below average hurricane season in the North Atlantic and Caribbean. It estimates that 2019 will have around five hurricanes, 13 named storms and two major (category 3-5) hurricanes. The probability of a US major landfalling hurricane is estimated to be around 90% of the long-term average.
Colorado State University
Posted: Monday, April 8th, 2019