Non-life insurance-linked securities (ILS) capital grew again in Q1 2017, continuing the trend from 2016, according to the latest ILS Market Update from Willis Towers Watson Securities, the investment banking business of Willis Towers Watson.
Following a strong Q4 2016, the market maintained momentum in the new year as the first quarter of 2017 saw US$1.7 billion of non-life catastrophe bond capacity issued through five transactions (record Q1 2016 saw $2 billion issued through nine deals), the company said.
ILS funds continue to raise capital while sponsors respond to the attractive spread environment by seeking new protection backed by liquid ILS (catastrophe bonds) while continuing to work up protection in other forms, the report added.
“Spread levels and margins continue to decline as investors increase their capital and gain market share,” it said. “As returns decline, ILS market participants need to find new structures to enhance returns, whether from more efficient collateral or otherwise.”
“As expected, assets under management have continued to grow at roughly the same pace as in 2016,” said Bill Dubinsky, head of ILS at Willis Towers Watson Securities.
“This is against a backdrop of challenging market conditions as competition among various players intensifies. Looking ahead we can be confident that the ILS market will continue to expand and grow as reinsurers and other players invest in this space,” he added.
“The breadth of the ILS market continues to expand not only by products and perils but also through increasingly differentiated risk-return appetites among the various investors,” Dubinsky noted.
The report can be downloaded from the Willis Towers Watson Securities website.
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