tyroleanva.com

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

The City National Rochdale Select Strategies Fund, a US mutual insurance-linked securities (ILS) fund focused on investments into industry-loss warranties (ILW’s) and industry-index trigger catastrophe bonds, delivered its strongest annual performance in the last year, with an almost 15.6% return to its investors.

With a now six year track record for this fund, Kurt Hawkesworth, President and Chief Executive Officer of the City National Rochdale Select Strategies Fund, commented, “The Fund’s 2023 portfolio performed well, with a net return of +15.58% for the year ended January 31, 2024.

“The Fund’s 2023 calendar year net return was the highest since the Fund’s inception and 2023 is the sixth consecutive year that the Fund generated positive, fundamentally non-correlated returns.”

Recall that, investment adviser City National Rochdale (CNR) offers this industry-loss warranty (ILW) and industry-index trigger focused mutual insurance-linked securities (ILS) fund strategy in the United States.

The capital from the City National Rochdale Select Strategies Fund is allocated to opportunities that are portfolio managed by the ILS investment team at Neuberger Berman and housed in its segregated account vehicle.

As Artemis’ index of ILW pricing shows, the industry-loss warranty (ILW) opportunity remains attractive, despite some notable softening of index-linked ILS products, such as ILW’s and catastrophe bonds.

That has helped the CNR ILW fund to a record return, over the last year to January 31st 2024.

Hawkesworth continued to explain, “The Fund’s 2023 return reflects the higher premiums realized following the occurrence of Hurricane Ian and increasing cash yields. In the catastrophe bond (“Cat Bond”) space, positive momentum for the Fund’s performance was assisted by a record total issuance in the primary market, and a secondary market that created tactical trading opportunities as sellers gradually sold off bonds maturing at the end of the year at a discount to raise cash for new issuances.”

Hawkesworth also noted that the CNR ILW fund portfolio was constructed to be more defensive, with higher attachment points, wider exclusions of non-peak secondary perils, and increased regional diversification through county- and state-weighted positions.

He noted that, weighted ILW protection continues “to become a larger share of the portfolio as demand from insurers and reinsurers for these products has steadily increased.”

He also commented that, “We believe that the incorporation of real-time environmental and financial risk considerations can have a meaningful positive influence on longer-term results and that our active management was an important driver of performance in 2023.”

Looking ahead, Hawkesworth explained that, “Currently, pricing in both the industry loss warranty (“ILW”) and Cat Bond segments continue to be attractive, albeit down slightly from the historic highs seen in Q4 2022. We remain confident that this environment will continue to present a compelling investment opportunity given the demand we are seeing as well as the structural and pricing improvements achieved post-Hurricane Ian.

“The Fund’s portfolio construction process for 2024 is now well underway, and we are focused on diversification and capital-efficient opportunities in the ILW and Cat Bond markets, where we believe risk-adjusted returns are most attractive.”

At January 31st, the total net assets of the City National Rochdale Select Strategies Fund had risen to almost $223.9 million, up from $218 million as of October 31st 2023.

Investments into ILW’s and industry-loss trigger cat bonds totalled $211.9 million of that, slightly down from the $213 million at October 31st last year.

The 15.6% return is healthy and outpaces many pure catastrophe bonds for that period, as ILW’s can often have higher return potential.

View our chart of industry-loss warranty (ILW) price trends here.

City National Rochdale mutual ILW fund delivers 15.6% return was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

Broking giant Aon is anticipating a “significant increase in demand” for property catastrophe reinsurance capacity at the upcoming mid-year renewals, with market conditions expected to continue developing favourably for buyers.

“The positive direction taken by the U.S. property catastrophe reinsurance market in January and again at April 1 looks set to continue at mid-year, with ample property catastrophe capacity to meet demand, and signs of greater price competition,” Aon’s Reinsurance Solutions has explained.

Saying, “We anticipate a significant increase in demand for property catastrophe capacity at mid-year renewals, with attractive opportunities for reinsurers to put excess capital to work on well-priced lower layer covers as well as meeting demand for increased limit.”

The broking group notes that earlier renewal discussions are now happening on a significant number of US programs, while reinsurers are “ready to provide indications and lock in capacity.”

Among those reinsurers targeting property catastrophe risk, there is a “broad desire” to write larger lines in 2024, which positively for cedents means that “supply will be available for insurers looking to purchase additional limit.”

“As such, pricing improvement and enhanced consistency on terms is expected to continue heading into mid-year renewals,” the Aon Reinsurance Solutions team explained.

In addition to which, the broker believes there is now more openness among reinsurers to consider providing the kind of supplemental covers that had been absent from the market in 2023.

While there is also an acceptance that insurers will be looking to push more standardised terms across allocated lines.

For regional US insurance carriers, the efforts taken to improve portfolios are having a positive effect, Aon believes, with reinsurers increasingly showing a positive response to them.

“We are seeing a growing number of reinsurers writing specific regional programs for the first time,” Aon said.

Further noting that, “As reinsurers continue to acknowledge and respond to the portfolio, underwriting and structure enhancements made by U.S. regionals, the overall market for the segment will continue to stabilize.”

The Florida market is at a “dynamic” point in its history, Aon notes, as “legislative reforms and underwriting actions helped the market turn the corner.”

This bodes well for the June 1st renewals, when most Florida specific reinsurance towers renew.

The broker highlights that, “A group of 51 Florida focused personal lines property insurance companies tracked by Aon generated a positive underwriting income for the first time in the last four years with an almost $900 million improvement in net underwriting margin for 2023.”

Market dynamics in Florida are also set to result in a major shift of risk back to the private sector, Aon states.

Explaining that, “The shift of Florida Citizens customers to private carriers, combined with the expiration of the Florida government-funded Reinsurance to Assist Policyholders layer and planned increases in reinsurance globally for many insurers, will create significant additional demand for new property reinsurance capacity.”

The increased demand is expected to be met though, with reinsurance capacity for property catastrophe risk in Florida “set to return and expected to meet increased demand at mid-year renewals.”

In addition, the catastrophe bond market is playing a key role and “Catastrophe bond activity for Florida property carriers is also at record levels,” Aon says.

The broker counts almost $1 billion of Florida risk ceded through cat bonds through the start of 2024, while a number of cat bond deals remain in the market as well.

Read all of our reinsurance renewals news.

Mid-year renewals to see significant increase in US property cat capacity demand: Aon was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

Florida’s property insurer of last resort, Citizens Property Insurance Corporation, has said that its sees market conditions as especially positive in the capital markets, as it looks to progress its $5.5 billion reinsurance renewal for 2024.

Citizens is expected to buy its largest tower ever, with a total of $5.5 billion of reinsurance limit needed this year.

The insurer has merged its three previous accounts, the Personal Lines Account (PLA), the Commercial Lines Account (CLA), and the Coastal Account, into a single Citizens Account and this is the first time Citizens is coming to the reinsurance market with this consolidated approach to its risk tower and risk transfer needs.

The total $5.5 billion reinsurance purchase will come in two main layers.

First, a sliver layer that sits alongside the FHCF coverage, which will provide approximately $630 million of per-occurrence one-year cover, in excess of at attachment point of $3.5 billion, to cover personal residential and commercial residential losses.

This sliver layer will be placed in the traditional reinsurance market and is designed to work alongside the mandatory coverage provided by the FHCF.

Above that will sit the bulk of Florida Citizens private market risk transfer and reinsurance (roughly $4.9 billion worth), with layer 1 attaching at $9.8 billion and extending to $16.7 billion, with reinsurance, catastrophe bonds and surplus all set to work together in this layer.

The residual market insurer is planning to keep its industry-loss triggered Lightning Re Ltd. (Series 2023-1) catastrophe bond for the coming year, clearly finding it a cost-effective form of reinsurance to continue paying the risk premiums for.

It’s important to note that this is not a new Lightning Re issuance, it’s just the multi-year cat bond rolling forwards and being maintained for another year for Citizens.

In addition to that, Citizens will need roughly $4.4 billion of new reinsurance and risk transfer for this layer.

Florida Citizens intends to procure this from both the traditional and capital markets, so more catastrophe bonds are anticipated.

Both aggregate and occurrence coverage will fill this layer as well, although it’s not clear whether any occurrence cat bonds would be issued, as Citizens has not sponsored a purely occurrence cat bond since 2013, with aggregate named storm cover the most likely structure, we believe.

This layer 1 of around $4.9 billion will provide reinsurance for Florida Citizens personal residential and commercial residential losses.

Now that the structure of the tower is better understood, it’s anticipated Citizens will get indications from markets to help it decide how best to structure the reinsurance within this layer and how much of it could be sourced in catastrophe bond and also collateralized reinsurance form.

Historically, Florida Citizens has always sponsored cat bonds and had a significant component of its traditional reinsurance provided by ILS funds, often in collateralized formats.

We see no reason to expect different in 2024. In fact, it’s anticipated that Florida Citizens could bring a particularly large catastrophe bond to market this year, while we’re also hearing that large lines are anticipated by some of the major ILS market players again.

Citizens staff noted that, “Thus far in 2024, global reinsurance markets, especially capital markets, have a positive outlook with an increase in capacity and demand with rates that projected to remain flat to – 5% depending on the cedent.”

No doubt Florida Citizens will have been watching the cat bond market closely and will be pleased with recent price developments for catastrophe bonds with Florida hurricane exposure.

A year ago, Florida Citizens secured just over $5.38 billion of reinsurance protection, from traditional and ILS markets, for 2023.

This consisted of $2.4 billion of outstanding catastrophe bonds, at the time of the renewal, and a fresh placement of $2.98 billion of traditional and collateralized reinsurance at the June 1st renewal in 2023.

Buying $5 billion of completely new reinsurance for 2024 is a significant increase, remember the Lightning Re bond is still in-force and will roll forwards to provide the other $500 million.

Florida Citizens: Capital markets “especially” positive for $5.5bn reinsurance renewal was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

Target allocation ranges have been adjusted for some of the investments that make up the giant insurance-linked securities (ILS) portfolio managed by PGGM, the Dutch pension fund investment manager, on behalf of its end-client the Dutch pension PFZW.

In particular, the target allocation ranges for the Swiss Re private sidecar structure Viaduct Re and private mandate vehicle Nightingale Re have both seen increases in recent months.

As we reported back in March, the PGGM managed insurance-linked securities (ILS) portfolio had grown to more than US $9 billion in ILS assets under management by the end of 2023.

At that time, we also knew was that the investor had been making increased use of the Nightingale Re Ltd. private mandate vehicle, through which PGGM aims to partner directly with cedents needing reinsurance capital, entering into private transactions that can be significant in size.

By the end of 2023 PGGM’s insurance-linked investments team had made 11 investments using the Nightingale Re structure.

But, now Artemis has learned from the latest disclosure made by PGGM’s client the Dutch pension fund for the care and healthcare sector PFZW, that the target allocation range has been increased for the Nightingale Re strategy from the EUR 50-250 million, that was set as recently as the middle of 2023, to now between EUR 250-500 million as of January 31st 2024.

Which implies the Nightingale Re strategy could double, or more, for PGGM and PFZW if they chose to, with scope to increase the amount of private collateralised reinsurance activity entered into using the Bermuda vehicle.

Another notable change, in the targeted allocation ranges, is for the Viaduct Re Ltd. private reinsurance sidecar arrangement between PGGM and Swiss Re.

We reported back in 2020 that PGGM had made a second investment into Viaduct Re, which meant private reinsurance sidecar arrangements between the investor and Swiss Re had reached over US $500 million in terms of size.

But now, the latest disclosure from pension PFZW, shows that the target allocation range for PGGM’s Viaduct Re arrangement has risen from the EUR 250-500m it had been set at back at the mid-point of 2023, to now between EUR 500 million to 1 billion as of January 31st.

Which again suggests scope to double the allocation, should it prove appealing and the market opportunity conducive to do so.

With these allocation target ranges, which PGGM / PFZW have set for each of the ILS managers and reinsurance partners they invest with, of course we don’t have specific visibility of just how large each allocation is.

But, when the target allocation range doubles, it suggests there has at least been growth in how much capital is being invested through that arrangement or ILS partnership, at least tipping it into the new bracket, as it becomes too large for the old.

For most of the rest of the PFZW ILS investments managed by PGGM, the target ranges remain static since 2023, to such industry names as Aeolus Capital Management, Fermat Capital Management, Nephila Capital, LGT ILS Partners, Elementum Advisors, Munich Re, AXA XL, rated reinsurer Vermeer Re, Partner Re and SCOR.

But, for the first time we have visibility of the allocation to a fund managed by Integral ILS, which is named the Riemann Fund and has an allocation target range of EUR 50-250 million set.

There is also one that has declined, which is a strategy that had been managed by AlphaCat, the Soteria Fund, which at June 2023 had been cited as having a target range of EUR 250-500 million, but now presumably being in run-off since the acquisition of Validus by RenRe, that target has dropped to EUR 50-250 million.

However, the overall ILS allocation scope remains within a range of EUR 5 billion to EUR 10 billion for PFZW, capping the potential across all of the different ILS strategies and reinsurer partnerships.

PGGM remains the largest single investor listed in our directory of pension funds and sovereign wealth funds investing in ILS and reinsurance and is the biggest allocator in the ILS sector.

PGGM / PFZW lift ILS allocation ranges for Swiss Re sidecar, Nightingale Re was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

The level of insurance-linked securities (ILS) capital reached new heights in 2023 on the back of record issuance in the catastrophe bond market, and while collateralised reinsurance has so far failed to rebound, there are signs of growth, according to James Vickers, Chairman of International, Gallagher Re.

Artemis spoke with Vickers around the launch of the reinsurance broker’s April 1 renewals report, which reveals that further price softening is anticipated as demand continues to rise alongside greater availability of capital.

After reaching record heights in 2023 and with cat bond market momentum persisting so far in 2024, Vickers feels that ILS capital’s influence could be quite significant at the mid-year reinsurance renewals.

“ILS capital is always playing a supporting role to the traditional market. But it is buoyant, and the spreads are coming down,” said Vickers.

“The best ILS fund managers are growing their funds under management; they produced some wonderful returns for 2023. And some of them we know have got offers of more capital that they feel comfortable to deploy. So, yes, ILS capital can be very helpful,” he added.

On the traditional cat bond side of the ILS marketplace, Vickers reiterated that ILS managers who’ve performed well almost have an embarrassment of riches at the moment.

“It’s more a question of can they continue to deploy their capacity at attractive terms,” he said.

But while cat bond market growth has been impressive in recent times, the collateralised reinsurance market, which is the largest part of the ILS universe, has stagnated.

“Collateralisation is an interesting topic,” said Vickers. “There are signs that there is a bit of growth there. Capacity is coming into that market, and for a lot of investors that’s a better way to enter the market. Partner up, do a collateralised sidecar with an existing, well-known reinsurer rather than investing in a bricks and mortar reinsurer from scratch.”

Vickers went on to note that it’s quite noticeable that a number of the new reinsurance startups that have been discussed have failed to materialise, stating that at this time, they don’t seem to be able to attract investors.

“And one of the reasons, I think, is that those who wish to invest in reinsurance, is you’ve got so many other options, such as collateralised sidecars, so if you can find the right partner, is quite an attractive option.

“So, collateralised, it may grow a bit, particularly as investors grow in confidence,” said Vickers.

Commenting on capital more broadly and whether it can rebuild this year and how influential that could be at the mid-year renewals and into 2025, Vickers said that if 2024 is another good underwriting year and the investment performance is decent, capital will continue to build.

“If you think what one good underwriting year can do, allied with reducing interest rates that are boosting up the asset side of the balance sheets as well, it can be quite significant.

“Having said that, as a reinsurer sitting sit there at the mid-year, you’ve still got the US hurricane season ahead of you, you’re probably not counting your chickens until you get to the end of the year and know what state your capital is going to be in. Touch wood, so far, it’s been a pretty good Q1. But just because nothing untoward happens between now and 1/6 doesn’t necessarily mean that reinsurers will be overly aggressive in terms of using their capital because they know that they’ve still got to get through the more traditionally difficult second-half year,” said Vickers.

Interestingly, Vickers told Artemis that while there appears to be a feeling around the investor community that the reinsurance market was hardening from around 2019 onwards, the reality is that 2020, 2021, and 2022 were all pretty poor years.

“And there are more hard bitten investors who think okay, fine, 2023 is a good year but one swallow doesn’t make a summer. Reinsurers need to produce another year and show that they can do it consistently,” said Vickers.

“Let’s wait and see whether reinsurers can manage a second decent year. Then I think the dynamics might change a bit. But again, smart investors will also be looking at demand as they will be worried if the capital grows too fast that’ll only push pricing down and the returns will fall away.

“Now, if they can be convinced that demand is going to grow and that capital can be put to good use at a reasonable margin, that’s another subject,” he concluded.

Read all of our interviews with ILS market and reinsurance sector professionals here.

Signs of growth in collateralised reinsurance market: Vickers, Gallagher Re was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

The “redistribution of risk” between primary insurers and reinsurance capital providers that occurred in 2023 has now helped to encourage and rebuild appetites, resulting in more reinsurance capacity being available at the April 1st renewals, Gallagher Re has said.

In particular this has been evident in the property catastrophe and specialty reinsurance sectors, the broker noted, and this has led to more stable conditions at the renewal.

At the same time, it has also helped to encourage more demand, resulting in better pricing and more capacity being available, so a far more calm renewal environment than was seen a year earlier.

In the property catastrophe reinsurance market, Gallagher Re notes a “continuation of reinsurance markets taking on more risk in search of the growth seen at the January 1st renewal.”

As a result, there was more available capacity for property catastrophe reinsurance programs and “incremental improvement” in risk-adjusted pricing at firm-order-terms, which the broker noted was “primarily at the top end of property programs.”

Interestingly, Gallagher Re noted that multi-class placement strategies were more prevalent, as buyers looked to capitalise on reinsurers appetites to write more property catastrophe business.

These multiclass placement strategies helped to support more challenging property per risk and casualty treaties, Gallagher Re said.

In addition, thanks to the increased level of reinsurance capacity being made available, Gallagher Re noted that property and specialty buyers were able to “secure improved terms and support in non-catastrophe areas.”

Gallaher Re CEO, Tom Wakefield, commented on the state of the reinsurance market at the April 1st 2024 renewals, “Broadly, the market has more capacity available, which is really encouraging. Industry capital has gone up by about 12% thanks to better combined ratios, fewer losses from natural disasters, and improved investment income.

“This means there’s more room to accommodate clients’ needs and should lead to better terms and conditions as a result. However, recent events in Baltimore remind us of the ever-changing dynamic market we are operating in.”

Read all of our reinsurance renewals news.

Redistribution of risk opened up more reinsurance capacity at April 1: Gallagher Re was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

It is hard to see anything other than further small price improvements for reinsurance cedents given the strong state of both traditional and alternative reinsurance markets at this time, Tom Wakefield, CEO of broker Gallagher Re has said.

The reinsurance broker’s CEO is anticipating further softening it seems, thanks to the increased levels of reinsurance capital in the sector.

Gallagher Re this morning estimated that reinsurance industry capital has grown by roughly 12%, while alternative or insurance-linked securities (ILS) capital was also up by double-digits in 2023.

Driving home just how much more stable the reinsurance marketplace is today than it was a year ago, Gallagher Re noted that protection buyers were able to access increased capacity, firm order and clear programs at improved terms, as well as secure support in critical non-cat areas.

The broker notes that in 2023 the main driver of the challenging market dynamic was a reluctance to deploy limit, rather than any shortage of deployable capital.

But, in 2024, the appetite to deploy limit has improved significantly and also deployable capital has increased as well, resulting in much more attractive market conditions for buyers.

“Industry capital has increased by roughly 12%, driven by a mix of much improved underlying combined ratios, a light natural catastrophe load (despite insured catastrophes across the industry being heavy), and better investment income,” Gallagher Re’s CEO Tom Wakefield explained.

“Increased capacity, coupled with increased appetite, should lead to an easing of terms and conditions for clients despite the increased challenges facing the insurance market on natural catastrophe exposure,” Wakefield continued.

Gallagher Re also estimates that alternative capital in the reinsurance market, so that contributed by catastrophe bonds, other ILS investments and collateralized structures, has similarly increased by double-digits over the last year.

Alternative capital has been driven higher by the same market fundamentals of favourable catastrophe loss experience and elevated investment income, the broker explained.

CEO Wakefield noted that, “Despite there being no signs of a significant influx of new capital yet, other than into some of the best performing ILS funds, it is hard to see anything other than a slight further improvement in pricing from the cedant’s perspective.”

Suggesting that Gallagher Re is anticipating further softening and of both price and terms, as its commentary suggests a market that has more room to give back to the primary insurers, before it hits a limit in terms of its risk-appetite.

Wakefield’s commentary even suggests that softening could perhaps be more of a market feature, should discipline slide in certain pockets of the marketplace.

“It remains to be seen if the reinsurers who are falling behind their growth targets will maintain the same pricing discipline at the mid-year renewals which represent the last chance to achieve their 2024 revenue goals,” the reinsurance broker’s CEO said.

Read all of our reinsurance renewals news.

Further reinsurance market softening seen likely: Gallagher Re CEO was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

Broking giant Aon has noted a buyers market for property catastrophe reinsurance at the April renewals, with flat to slightly down pricing and an environment where there has been a “dramatic shift” towards ample capacity, within which ILS market growth is a key factor.

Aon said that reinsurance market conditions have continued to ease since January 1st, resulting in a much better opportunity for buyers at the April 1st renewals where some 60% of Asian treaty reinsurance business renews.

The broker noted that renewal pricing was “broadly flat” for property catastrophe reinsurance, but that certain Asia Pacific markets and product lines “remained challenged and subject to a tightening in terms and conditions”.

These included, property per-risk reinsurance; industrial fire accounts; certain natural catastrophe loss-affected regions; and U.S. exposed casualty treaties, Aon said.

In Japan, property catastrophe reinsurance renewal pricing was “flat to slightly reducing”, Aon said, while South Korea, China and India also saw greater competition for catastrophe business, but to varying degrees.

Aon also noted that, at April 1st, facultative reinsurance was a focus, as reinsurers displayed an increased appetite for this business at the renewal, while new players continued to enter the market, such as managing general agents.

New reinsurance capital deployment opportunities were also seen in India, Aon reports.

George Attard, CEO of Asia Pacific for Aon’s Reinsurance Solutions, commented, “The April 1st reinsurance renewals were more predictable and generally favorable to reinsurance buyers. As mid-year renewals get under way for the catastrophe-exposed markets of Florida, Australia and New Zealand, reinsurers are indicating a strong appetite for catastrophe risk. We would expect the positive trend of the January and April renewals to continue at mid-year renewals, with adequate capacity for property catastrophe risks and enhanced pricing competition. Insurers looking to purchase additional limit will also find adequate capacity to meet their needs.”

Interestingly, Aon also reports today that global reinsurance capital is back near its previous high, at $670 billion at the end of 2023.

Strong reinsurer results and a recovery in asset values in 2023 helped here, but so too did insurance-linked securities (ILS) market growth.

In fact, Aon Securities now estimates that ILS capital grew by 7% in 2023, to reach a new all-time high of $108 billion at the end of the year.

Catastrophe bond growth will have been one driver of that, but the expansion in the fourth quarter from the $103 billion Aon had reported for the end of September 2023 figure, must include growth on the collateralized side of the ILS market as well, given the cat bond market alone did not add $5 billion in the final quarter of the year.

That new high of $108 billion may be eclipsed once Aon reports the next quarterly rise, as capital has been building in the ILS sector and is expected to continue to do so through to the middle of the year.

Looking towards the mid-year renewals, where Florida and the US are more the focus, Aon said that Aon’s earlier renewal discussions are happening on a significant number of U.S. mid-year renewals, which is a positive trend, with reinsurers said “ready to provide indications and secure capacity.”

Aon notes that it expects the market will see around $7 billion of additional demand from U.S. insurers for property catastrophe reinsurance limit at the mid-year renewals.

This is because programs are keeping pace with inflation and evolving views of risk, as well as the contribution from “a resurgent Florida market.”

Given the rise in traditional and alternative reinsurance capital and the interest being shown by investors, that additional demand is likely to be soaked up very easily and it increasingly seems the mid-year renewals will be a far more stable, perhaps even flat, environment compared to the prior year.

Aon: Dramatic property cat shift at renewals. ILS capital at new $108bn high was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.

This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

Tokio Marine Holdings, Inc., through its subsidiary Tokio Marine & Nichido Fire Insurance Co. Ltd., has become the first Japanese insurer to make use of a SOFR-based World Bank Sustainable Development Bond as a permitted investment within its latest catastrophe bond issuance, the company highlighted today.

As Artemis has been reporting, Tokio Marine has been in the market since February and has now secured its targeted $100 million Kizuna Re III Pte. Ltd. (Series 2024-1) catastrophe bond recently, with the reinsurance coverage from the transaction priced at the low-end of initial guidance.

Now, the Japanese insurer has highlighted its use of the proceeds of the catastrophe bond issuance to purchase a sustainable development bond, saying that using this “as collateral for the Kizuna Re III cat bond is supporting the achievement of sustainable development goals and contributing to the realization of a sustainable society.”

Use of proceeds of cat bond issues to invest into financing for sustainable development helps sponsors align their catastrophe bond issues with their own environmental, social and governance (ESG) agendas, while also making the investment more appealing to investors with an ESG focus or mandate.

Tokio Marine used the proceeds of the Kizuna Re III 2024-1 catastrophe bond, that provides it with earthquake reinsurance and was issued out of Singapore, to purchase a SOFR-based Sustainable Development Bond issued by the World Bank Group’s International Bank for Reconstruction and Development (IBRD).

The company said that, through its sustainability strategy, it aims to “solve social issues through business activities and contribute to the realizations of a sustainable society” as a medium- to long-term growth engine and is accelerating its efforts to take climate action, improve disaster resilience, and protect the natural environment.”

The company said that, as part of its goal to improve disaster resilience in what is one of the most disaster-prone countries in the world, Tokio Marine has been a regular user of catastrophe bonds, alongside purchasing traditional reinsurance capacity.

“As a part of these strategies, besides sponsoring the issuance of the Kizuna Re III cat bond, TMNF has elected to invest the proceeds from the sale of the Kizuna Re III cat bond in a SDB issued by IBRD (rather than money-market funds), which is the first example of a Japanese insurer doing so since IBRD notes transitioned from LIBOR to SOFR,” the company explained.

Adding that, “The principal amount of this catastrophe bond raised from qualified institutional investors will be invested in a SDB issued by IBRD under its Global Debt Issuance Facility. The net proceeds of the SDB will be used by IBRD to fund projects, programs, and activities in IBRD’s member countries designed to achieve positive social and environmental impacts and outcomes.”

It’s encouraging to see the use of sustainable development bonds as collateral investments in the catastrophe bond market expanding further beyond just the World Bank, to private insurance sector cat bond sponsors.

The World Bank itself was the first to do so this, since when insurance giant Assicurazioni Generali S.p.A. developed its framework for Green insurance-linked securities (ILS) which saw the proceeds of one of its catastrophe bonds used to refinance a green asset in an effort to help avoid greenhouse gas emissions.

But, Tokio Marine is the first private insurance or reinsurance market sponsor of a catastrophe bond to use a puttable SOFR linked Sustainable Development Bond from the IBRD, which marks an efficient way to structure a cat bond with collateral that can be put to work in supporting sustainable or ESG driven goals.

As a reminder, Gallagher Securities, the insurance-linked securities (ILS) specialist arm of reinsurance broker Gallagher Re was the sole structuring agent for this new cat bond for Tokio Marine, so will have been instrumental in incorporating the sustainable development bond as permitted investments for the collateral, within the overall cat bond structure for this issuance.

You can read all about this new Kizuna Re III Pte. Ltd. (Series 2024-1) catastrophe bond transaction and every other Tokio Marine sponsored cat bond in our Artemis Deal Directory.

Tokio Marine is first Japanese cat bond sponsor to use sustainable development bond was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.