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Disaster risks and costs are on the rise in Asia, a region where under-insurance is still the norm and spending by government’s on contingent sources of disaster risk financing relatively scarce, leading the Asian Development Bank (ADB) to call for more to be done.

Among the issues cited as requiring more focus, the use of insurance, reinsurance and alternative forms of risk transfer, in terms of protection directly for the people threatened by disasters as well as for governments and corporations, is seen as key to the ability of the Asia region to increase its resilience to natural catastrophes, severe weather and climate related risks.

“Four out of every five people affected by natural hazards live in Asia,” explained ADB Chief Economist Yasuyuki Sawada. “Asia has led the way on disaster risk reduction efforts in recent years, but more action is needed to tackle both vulnerability and responses at the national and the community level.”

Asia faces an environment where climate change, rapid urbanisation and rising values-at-risk are resulting in increasing exposure levels.

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Radian Guaranty has now completed its second issuance of mortgage insurance-linked securities (ILS), citing a pleasing response from investors to its $562 million Eagle Re 2019-1 Ltd. that secures it additional reinsurance capacity from the capital markets.

The transaction has been in the market for some weeks now and saw Radian Guaranty looking to increase the participation of capital market investors within its excess-of-loss mortgage reinsurance program.

This second mortgage ILS follows Radian Guaranty’s first sponsorship of a  mortgage insurance-linked notes (ILN) transaction in the fourth-quarter of 2018, the $434 million from the Eagle Re 2018-1 Ltd.

Now, with the successful completion of its second Eagle Re mortgage ILS transaction, Radian Guaranty now benefits from almost $1 billion of fully collateralized mortgage reinsurance protection.

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The City National Rochdale Select Strategies Fund (CNRLX), an industry loss warranty (ILW) focused mutual insurance-linked securities (ILS) investment fund, managed a 6.6% annual return in the year to Jan 31st 2019, while its assets under management increased in the last quarter as well.

Given the focus of the City National Rochdale Select Strategies Fund ($CNRLX) ILW focused reinsurance and retrocession investment strategy on peak peril and regional U.S. ILW contract investments, facilitated by accessing the risk through the portfolio of the Neuberger Berman ILS management team’s NB Re Ltd. vehicle (the renamed Iris Re), this fund managed to avoid much impact from the 2018 catastrophe events.

When we last reported on the City National Rochdale mutual ILS fund it had reported net assets valued at $47.4 million as of October 31st 2018.

The fund grew around the January reinsurance renewals, when fresh capital will have been deployed into new ILW contract investments.

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Alternative risk transfer and ILS mechanisms in the global property and casualty (P&C) market are expected to become more commonplace in the months and year ahead, according to law firm Sidley Austin’s Global Insurance Review.

In addition the law firm believes that we haven’t seen the end of M&A activity in the ILS space, suggesting there could be more forays to acquire ILS fund managers in the coming year or more.

The firm’s recent publication explores the global insurance and reinsurance industry in 2018, including the ever-expanding alternative risk transfer space.

Sidley Austin notes continued growth of the insurance-linked securities (ILS) market in spite of two consecutive years of heavy catastrophe losses, explaining that it expects market growth to persist in 2019.

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WASHINGTON, DC, UNITED STATES (12 April 2019) — The Asian Development Bank (ADB) and United Nations Development Programme (UNDP) signed a 5-year memorandum of understanding (MOU) today to accelerate progress towards sustainable development in Asia and the Pacific

The MOU was signed by ADB President Mr. Takehiko Nakao and UNDP Administrator Mr. Achim Steiner in Washington, DC. The agreement builds on an ongoing partnership between ADB and UNDP and sets the stage for greater collaboration at the country and regional levels, and stronger cooperation in accelerating progress towards the Sustainable Development Goals (SDGs) in Asia and the Pacific.“ADB and UNDP have had a long-standing and productive partnership to support development progress in Asia and the Pacific,” said Mr. Nakao. “UNDP’s support to countries on policy dialogue and technical capacity building can complement ADB’s project implementation. Through the MOU, we will work together to realize a prosperous, inclusive, resilient, and sustainable Asia and the Pacific.”

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WASHINGTON, DC — The Asian Development Bank (ADB) and United Nations Development Programme (UNDP) signed a five-year memorandum of understanding (MOU) today to accelerate progress towards sustainable development in Asia and the Pacific.

The MOU was signed by ADB President Mr. Takehiko Nakao and UNDP Administrator Mr. Achim Steiner in Washington, DC. The agreement builds on an ongoing partnership between ADB and UNDP and sets the stage for greater collaboration at the country and regional levels, and stronger cooperation in accelerating progress towards the Sustainable Development Goals (SDGs) in Asia and the Pacific.

“ADB and UNDP have had a long-standing and productive partnership to support development progress in Asia and the Pacific,” said Mr. Nakao. “UNDP’s support to countries on policy dialogue and technical capacity building can complement ADB’s project implementation. Through the MOU, we will work together to realize a prosperous, inclusive, resilient, and sustainable Asia and the Pacific.”

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Alternative sources of capital now contributes at least 4% of the global non-life insurance and reinsurance market’s roughly U.S. $2 trillion capital base, according to Swiss Re.

The reinsurance firm puts the overall non-life global insurance capital base at $2 trillion, 80% (or $1.6 trillion) of which comes from primary insurers, 16% (or $320 billion) is from reinsurance firms, with the remaining 4% ($80 billion) coming from insurance-linked securities (ILS) funds, their investors and other alternative capital vehicles.

$80 billion seems rather low for an estimate of alternative capital in the industry at this time, which if you include some of the trapped capital is certainly closer to or above the $100 billion mark, according to our data, which puts alternative capital nearer to 5% of global non-life insurance and reinsurance capital.

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AP3, the Swedish state sector pension fund, has been investing in catastrophe bonds, insurance-linked securities (ILS) and reinsurance linked assets since 2008 and the investor increased its allocation to the ILS sector in 2018, while the asset class delivered a positive return despite the catastrophes.

In 2018, the size of AP3’s allocations to ILS and reinsurance linked funds increased to roughly US $567 million, up from slightly under $500 million at the end of 2017.

This increased the percentage of its overall assets that are invested in ILS to 1.6% of its total assets of around $36.6 billion at year-end 2018, up from 1.2% at the end of the prior year.

AP3 is another of the large pension investors that has significant experience in the ILS space and its use of the asset class as a diversifying source of relatively uncorrelated return continued to pay off, despite the catastrophe loss of 2017 and 2018.

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Over the last two decades, the capital structure of the reinsurance business has fundamentally shifted, driven by the forceful nature of third-party, or alternative reinsurance capital, according to Aditya Dutt of RenaissanceRe.

Now, the capital market is the first avenue people turn to when major catastrophe losses strike, with deployment of third-party capital a much quicker and easier win than establishing entirely new reinsurance companies.

Addressing an audience at the Old Library in the Lloyd’s of London building yesterday, Dutt, the President of Renaissance Underwriting Managers Ltd. and Senior Vice President (SVP) and Treasurer of RenaissanceRe Holdings Ltd., discussed the reinsurance capital structure, noting a “permanent change” to the business over the last twenty or thirty years.

“The capital structure of the reinsurance business, which to me is fascinating, is one of the most profound changes in our industry over the last 20-30 years,” said Dutt.

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