A number of industry-loss warranty (ILW) contracts providing retrocessional reinsurance are set to pay out after the latest updates to third-party data providers estimates of insurance industry losses caused by last year’s Hurricane Irma. At the beginning of July the industry loss estimate for hurricane Irma passed another key ILW trigger point, resulting in a further hit to traditional and alternative or ILS fund capacity providers to some affected transactions.
More details have emerged about a groundbreaking flood risk catastrophe bond, which has transferred $500m on behalf of FEMA's National Flood Insurance Progam (NFIP). Hannover Re acted as a “transformer,” by sponsoring the issuance of the FloodSmart transaction through a special purpose reinsurer. GC Securities served as structuring agent. The bond marks the first time FEMA has sought capital market protection.
Nephila Capital can proceed with its Lloyd’s managing agency plans after having received the initial green light. This means it can submit an application to the Prudential Regulation Authority and Financial Conduct Authority. Once formally authorised, Nephila Syndicate Management Ltd (NSM) will take over Syndicate 2357, which has been managed by third-party syndicate manager Asta since 2013.
Pension reinsurance provider Prudential Financial and Aviva Life and Pensions UK have struck their first longevity reinsurance transaction. As part of the transaction, The Prudential Insurance Company of America (PICA) assumes the longevity risk for approximately £1 billion (nearly $1.4 billion) in pension liabilities.
Drought and wildfires during the month of July are likely to result in a minimum of €3.5 billion in economic losses in Europe, according to Aon's Impact Forecasting. Northern Europe was impacted by a long-term rainfall deficit that caused one of the deepest droughts on record, contributing to combined European drought losses in excess of $4 billion. According to various industry estimates, German farmers alone could face economic losses of €2.5 billion ($2.9 billion).
Conditions in the ocean and the atmosphere are conspiring to produce a less active Atlantic hurricane season than initially predicted in May, according to NOAA. Seasonal forecasters have increased the likelihood of a below-normal Atlantic hurricane season to 60 percent (up from 25 percent in May). The likelihood of a near-normal season is now at 30 percent, and the chance of an above-normal season has dropped from 35 percent to 10 percent.
Insurers will need to re-evaluate wildfire risks in California, given that the highly destructive current and 2017 wildfires predominantly are occurring or did occur in areas classified as low to moderate risk, according to AM Best. The rating agency believes insurers’ risk-scoring models likely need adjusting and predicts the 2018 wildfire season may produce even greater losses for insurers compared with 2017. The combination of longer sustained higher temperatures along with less frequent rainfall heightens the risk of fire.
Posted: Monday, August 13th, 2018