S&P Report Finds Volume Increases as Prices Drop in the ILS Market

July 29, 2014

Standard & Poor’s Ratings Services will publish its annual “Global Reinsurance Highlights” publication to coincide with the 2014 Reinsurance Rendez-Vous in September. S&P said the report would “provide a detailed perspective on the market, focusing on the competitive pressures that will impede reinsurers’ ability to generate strong returns, and the challenges for the sector to reinforce its relevance to existing and future clients as the global economy continues to evolve.”

The report entitled -“A Record Volume Of Catastrophe Bonds Highlights Increasing Competition In The Insurance-Linked Securities Market-” offers “an element of the overall picture to be provided in the publication with a view of the continued growth in the alternative capital market, particularly insurance-linked securities (ILS), and the impact it is having on competition in the traditional and alternative markets.

“Through the end of June 2014, we rated the highest amount of catastrophe bonds for the first half of any year. We believe growth will continue, but at a more moderate rate,” S&P said.

Credit analyst Maren Josefs said: “In our view, growth should come from various avenues such as increased take-up rates in disaster-prone areas, disaster protection purchased by governments, and product innovations through underwriting joint ventures.”

In S&P’s view the current competition among market players “has been leading to a welcome reduction in prices and a loosening of terms for cedants. However, we caution that for the alternative market to maintain the credibility it has gained after all this time, growth should not come at the expense of looser underwriting discipline and less due diligence.

Source: Standard & Poor’s

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