The rising trend in the risk market is expected to continue, with positive growth in the cat market expected as a result, according to Swiss Re Capital Markets.
Capital markets and brokers of the Swiss Re reinsurance group expect that insurance-linked securities (ILS) in the form of risk loans will continue to fill any gaps in the coming years.
In a busy report for the first part of the risk market, Swiss Re’s Capital Markets team highlights the latest developments in reinsurance focused on risk and how it has provided opportunities for the cat. bond market.
In the first half of the year, “The ILS market offered investors another way to diversify risk in a tight market,” Swiss Re Capital Markets explained.
The reinsurance company believes that the backlog of some of the previous home casualty underwriters has created an opportunity for the ILS market, which could provide further opportunities for market growth.
“Some insurers have reduced capacity in high-risk areas or closed their risk areas (nat cat) completely, which has led to increased opportunities in the ILS market,” reinsurers’ business watchdog ILS explained.
He added, “Given the growing demand for general insurance, we expect the number of new products to be offered to continue and increase growth.”
The first half of the year has provided further evidence of the strength of the catastrophe interest rate and the insurance premium class (ILS), Swiss Re believes.
Both investors and sponsors benefited from cat groups until the first half of 2022, the former in unconnected areas that fared better than most financial classes, the latter due to the availability of insurance risk to support their needs.
On the part of Invest bonds for cats, Swiss Re said, “Some of those who stayed behind in 2020-2021 returned to benefit from the market value as a financial group with a competitive advantage.”
Even for insurers, “Issuance of cat bonds remains high because insurers now need larger lines to support rising claims costs and reduce profit volatility.”
Overall, Swiss Re sees the first half of the financial year as “positioning the market well for the next phase of growth.”
“Swiss Re Capital Markets (SRCM) is seeing increased interest from potential sponsors looking to diversify their risk-taking strategies, as well as from investors looking to benefit from an already integrated investment team,” the company explained.
Continuing to say, “Bringing all of these groups to the ILS market is SRCM’s main goal as we continue to lead the market.”
The stable reinsurance market, combined with other reinsurance from property risk, has provided a clear opportunity for the ILS market to support companies’ risk-taking needs.
“Even in a difficult market, catastrophe bonds remain an attractive source of alternative insurance for new and existing sponsors who want to explore how these new and unconventional instruments can support their franchise,” Swiss Re Capital Markets said.
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