Swiss Re Study Forecasts ‘Continued Growth’ for Insurance Linked Securities

September 7, 2011

According to Swiss Re’s study – “The fundamentals of insurance-linked securities” – some 15 years after they were introduced, the “market for insurance-linked securities (ILS) is poised for continued growth as re/insurers, governments and corporations continue to access capital market solutions to finance growth, manage their capital and transfer risks related to natural catastrophes and other extreme events.”

The report, aimed at companies wishing to transfer peak risks as well as qualified institutional investors seeking to invest in ILS, “offers a comprehensive overview of the structures and features of this growing asset class, together with a summary of the benefits of ILS from the perspectives of both the sponsor and the investor,” Swiss Re explained.

It also noted that Swiss Re was “a pioneer in the development of the ILS sector,” and that it has sponsored almost $10 billion in transactions for its own protection. In addition, “through its appropriately licensed entities,” the reinsurer has “underwritten more than $20 billion of both life and non-life risk including third-party transactions.”

It has also come up with a number of innovations that have been essential in developing the ILS market – notably as a founding shareholder in PERILS AG, which created the European Windstorm Index. The index has served to improve “the transparency of industry losses,” and provides “standardized, consistent and timely market data,” which has “facilitated recent growth in European cat bonds.”

Matthias Weber, Swiss Re’s Head of Property & Specialty commented: “Insurance Linked Securities are an integral component of our product offering to clients and we are starting to see increasing demand for non-US peak risks. By offering ILS, Swiss Re can combine its strong origination and distribution platforms with its ability to assume basis risk and tail risk.”

Martin Bisping, Swiss Re’s Head of Non-Life Risk Transformation, added: “The ILS market is strong and poised for continued growth. Our investor and sponsor base is made up of stable long-term partners and we consistently generate new interest in the sector. We believe this combination will lead to a continuation of robust ILS market growth.”

Source: Swiss Re

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