The outlook for the insurance-linked security (ILS) market is positive, following continued growth in 2018, according to a report from Willis Re.
The ILS market update Q4 2018 reveals that, despite a slow down during the final quarter of last year, the market reached $93 billion of outstanding non-life capital, up from $88 billion in 2017.
The report also shows that non-life catastrophe issuance remained strong, in the face of multiple smaller catastrophic events in 2018 and a meaningful series of catastrophes in 2017.
Around $9.2 billion of new capital was delivered, meaning 2018 was the second most active calendar year ever.
$535 million in bonds was issued during Q4, $125 million of which provides protection from California wildfire liability, $200 million grants peak multi-peril protection, and $210 million covers US earthquake (workers’ compensation).
The report suggests that within the ILS space the lines of demarcation are blurring as ceding companies and intermediaries look to the range of cat bonds, sidecars, and other collateralised ILS, to identify the best tools to meet challenges, develop new solutions and refine existing structures.
According to the report, this blurring should aid the market to overcome concerns including prompt loss reporting, valuation accuracy, collateral release and rollover, and increasing volatility.
It emphasises that there are real challenges that need to be addressed, but solutions for them seem to be close at hand.
William Dubinsky, managing director and head of ILS at Willis Towers Watson Securities, said: “We are seeing the convergence of convergence. The overall ILS figure is today a much more meaningful measurement of market size than focusing on cat bond and sidecar issuance alone.”
“ILS capacity and products are growing organically and dynamically as gaps between different products and subsectors fill in, and innovation and market necessity create new capacity and products.”
“Our confidence in the speed that new solutions will emerge gives us a favorable outlook for ILS in 2019.”