Insurance-linked securities (ILS) is an established asset class that continues its momentum despite the challenges of the catastrophe events in 2017, according to a survey by Willis Towers Watson.
The global ILS market survey, which included responses from end investors, ILS funds, and buyers–the three active groups in ILS–was conducted more than six months after the major 2017 losses and responses are therefore informed by the crystallisation of ILS funds’ performance.
According to the survey, all three participating groups have weathered recent loss activity with their enthusiasm for ILS intact.
The high level of natural catastrophe losses in 2017 has not reduced this positive market sentiment, and the overriding conclusion of the survey remains that ILS has become increasingly mainstream.
The survey revealed that cedants and funds believe that ILS will continue its growth, through increased usage and an increase in covering risks outside property catastrophe, such as property per-risk, cyber, and marine.
End investors confirmed that they see reinsurance as an established asset class, opposing some observations that rising asset yields would deter new capital inflows to ILS.
Carl Hess, head of investment, risk, and reinsurance at Willis Towers Watson, said the company cooperated across the components of Willis Towers Watson’s investment, risk and reinsurance segment, allowing it to “access to all the relevant market participants”.
Hess added: “That allowed us to execute the most comprehensive survey yet of the ILS market.”
“It’s the same connected, integrated approach we use daily to develop and deliver ILS advice and solutions for our clients.”
Willis Re global CEO James Kent commented: “The industry has widely reported the growth in the ILS market and this comprehensive survey further supports the development of ILS as an asset class despite the challenges of the catastrophe events in 2017.”
“From a Willis Re perspective we see a divergence in the intent of reinsurers to utilise ILS capacity largely driven by client type.”
He continued: “For growth to continue, ILS investors will need to demonstrate the ability to innovate and provide optimal solutions to meet clients’ evolving needs.”
“Furthermore the trust language, where used, will need to reflect a closer alignment with clients’ expectations. The ILS investors with longstanding and successful track records, supported by consistent and well-regarded management teams, are the ones best equipped for future success.”