www.ilstoday.com
Since its inception in 1996 the insurance-linked securities market has witnessed worldwide issuance of $38bn and has more than remained stable throughout the credit crunch. According to AM Best the catastrophe bond market grew from $1.99bn to $4.69bn between 2005 and 2006 and Swiss Re predict that the wider ILS market is set to follow suit by growing to $1trln over the next decade.
Just last week, investors raced to buy a $260m catastrophe bond designed to protect East Japan Railway against damages in the event of an earthquake. Rodrigo Araya of Moody’s Investors Service says, “The market has grown at a scorching pace in the last three years. We will probably see about $8bn in new issuance this year”.
Investors are attracted to ILS because they offer an investment that is not directly correlated to fluctuations in the wider financial markets. This means that they have been largely unaffected by the collapse of the subprime markets which has allowed the market to continue to boom over the summer.
Add to this the introduction of the first draft directive of Solvency II and the market is set to explode. The directive basically says that not only reinsurance but the securitisation of derivatives can also be used to mitigate liability risks for life and non life insurance. The new legislation allows for insurance companies to reduce the regulatory capital requirements by securitising risks which will encourage more new risks to be securitised and further rapid growth in the sector.
The new legislation presents insurers with a series of choices and challenges and it is crucial for them to prepare now if they are to be among those who benefit. Those who grasp the opportunity will gain competitive advantage over those who don’t.
The European ILS and Cat Bond Summit 2008 is taking place on 7th – 8th November 2008 at the Hilton Olympia Hotel, London. Visit www.ilstoday.com/
This summit is completely independent with the aim to make sure that insurance companies get a clear and concise guide to guarantee success and long-term competitiveness in the ILS and cat bond market. It provides an excellent opportunity for you to make contact with issuers, sponsors, investors and solution providers and will make sure that you are correctly positioned to benefit from the ILS market.
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