News review | Monday 29 April 2019

The US Federal Emergency Management Agency (FEMA) has secured a $300m reinsurance placement for the National Flood Insurance Program (NFIP) from the capital markets investors, brings the total flood cover to $2.12 billion. The first flood catastrophe bond, FloodSmart Re (Series 2018-1), was issued in August last year, when the agency secured $500m of reinsurance from the capital markets. “Our continued engagement with the capital markets contributes to FEMA’s commitment to strengthening the financial framework of the NFIP... and is a viable example of the role private markets can play in managing US flood risk,” said David Maurstad, chief executive of the NFIP.


United Insurance Holdings (UPC Insurance) is back with a new catastrophe bond for 2019, Armor Re II Ltd. (Series 2019-1), and it should be the firm's largest yet at an expected $200m or greater in size. It is understood the transaction is now being marketed to ILS investors and funds, as UPC seeks to expand its ILS backed reinsurance capacity. The Florida-based group is again seeking coverage for four of its subsidiary insurers for certain losses caused by US named storm and earthquake events on an indemnity and per-occurrence basis.

Prudential Financial has concluded about $2.6 billion in previously undisclosed longevity reinsurance contracts. The early 2019 de-risking wave has been driven in part by many pensions seeking to close agreements prior to the original March 29 Brexit deadline. “Pension schemes that can afford to de-risk have raced forward in the opening months of 2019, taking advantage of the window before Brexit to reduce their risks and lock in gains,” said Amy Kessler, head of longevity reinsurance at Prudential Financial.

Total capital dedicated to the global reinsurance industry measured $462 billion at year-end 2018, according to Willis Re. While traditional reinsurance index capital was down by 10%, but contrast alternative capital grew 6% to $93 billion. Index capital reduced by $13.7 billion due to the exits of Validus and XL Catlin through M&A.

Smaller but more frequent natural catastrophes are on the rise, according to Swiss Re Sigma. "The paradox is that the insurance industry is well capitalised to absorb this risk," it said. "According to Swiss Re estimates, total capital in the non-life re/insurance market (including alternative capital) was more than $2 trillion at the end of 2018."

Damage from flooding in March 2019 is estimated at $8 billion from events across the globe, according to Aon's catastrophe report. Following heavy snowfall and rain, record temperatures, severe thunderstorms, and hurricane-force synoptic winds in the US, historic river flooding swept across the Missouri and Mississippi River Basins. Total economic losses were estimated beyond $4 billion, with up to $1 billion in claims.

Posted: Monday, April 29th, 2019