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The steady rise in interest rates of instruments such as U.S. Treasuries, that are typically used as collateral for insurance-linked securities (ILS) and collateralized reinsurance investments, have now served to boost returns for ILS investors in 2019.

U.S. Treasuries have seen their interest rates rise steadily over the last two years, which supports better returns for ILS investors given the floating nature of ILS instruments such as catastrophe bonds and other reinsurance-linked assets.

U.S. Treasuries fell to as low as a 0.20% return back in 2016, but steady increases helped by U.S. interest rate rises mean that they currently stand at around 2.07% for a 90-day Treasury instrument.

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Investing in insurance-linked securities (ILS) and other reinsurance linked assets that are broadly uncorrelated with wider financial markets are gaining in appeal, as alternative asset class allocations grow and a focus on ESG quality assets increases.

Insurance-linked securities (ILS) and other reinsurance assets, from catastrophe bonds, to ILS funds, sidecars and other vehicles, are all gaining an increasing profile in Japan.

Japanese pension funds have been investing in the ILS asset class for more than a decade, but now it’s reported that interest in investing in ILS is becoming increasingly widespread, in particular among corporate pension funds and regional banks.

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City National Rochdale Select Strategies (CNRLX), an industry loss warranty (ILW) focused mutual insurance-linked securities (ILS) investment fund, has continued to steadily grow its assets during its last reported quarter, although some loss impacts remain visible in the fund portfolio.

The City National Rochdale Select Strategies Fund ($CNRLX) ILW focused reinsurance and retrocession investment strategy is focused on peak peril and regional U.S. ILW contract investments.

It achieves this exposure through a relationship with the experienced ILW and index reinsurance investment team of Neuberger Berman, accessing risk by investing in cells of the Neuberger Berman ILS team’s NB Re Ltd. vehicle (previously named Iris Re).

 

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Public and private market efforts and collaboration to narrow or even close the insurance protection gap need to be accelerated and uptake of risk transfer needs to be extended, according to Chairman of AXA Denis Duverne.

Speaking at an Insurance Development Forum (IDF) day held at the International Insurance Society (IIS) conference in Singapore last week, Denis Duverne, IDF Chairman and Chairman of the Board of AXA called for a redoubling of efforts by industry to address the protection gap.

Asia remains the region most affected by climate and natural catastrophes, and the Asian Development Bank (ADB) said that from 2000 to 2018 more than 84% of people affected by natural hazards were living in developing Asia.

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Peru’s earthquake catastrophe bond will make a $60 million partial pay out of its principal to the country after its parametric triggering was confirmed in the calculation agent report, it has now been confirmed to us.

This $200 million IBRD CAR 120 Peru quake catastrophe bond, part of the World Bank’s giant Pacific Alliance issuance of earthquake cat bonds for the four nations of the trading bloc, was triggered by the magnitude 8.0 earthquake that struck Peru on Sunday 26th May.

That earthquake, which as we explained at the time it occurred suggested a 30% pay out of the cat bond’s principal looked likely, has now been deemed strong enough to breach the required parameters and as a result investors in the bond will face a loss.

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The majority of insurance-linked securities (ILS) funds are expecting their asset base to grow by more than 10% over the next five years, according to the results of a survey of the ILS market.

The ILS fund market is positioning itself for further growth in assets it seems, as ILS funds responding to a survey undertaken by insurance and reinsurance broker Willis Towers Watson (WTW) said they largely expect to expand their capacity over the coming years.

This ties in nicely with another finding that institutional investors are also increasingly seeking out ILS allocation opportunities, as sovereign wealth funds, pension funds and others continue to explore the potential for insurance and reinsurance linked assets to add to their overall portfolio qualities and returns.

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How do you find new incentives for economic development and attract foreign companies? Belarus is currently grappling with this problem in an effort to get new investments and access to the European market. To achieve this goal, a new industrial park is being built near Minsk.

The Great Stone Industrial Park is a joint project with China. Surprisingly Belarus, a small country in Eastern Europe, is one of the key areas of China’s Belt and Road initiative – the so-called Silk Road of the 21st century.

China is counting on Belarus to become a major transit hub delivering Chinese goods to Europe. And Belarus wants to be a part of this process. It sees it as an opportunity to give a significant boost to the local economy.

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Jan Kellett, senior adviser, Finance Hub, United Nations Development Program, said large populations will be better served when insurers work with organizations and governments to tailor products to fill unmet needs.

 

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The insurance-linked securities (ILS) market is taking a more thoughtful approach to the way it does business in the wake of recent catastrophe years, while fresh capital is expected to flow in over the coming months, according to Paul Schultz, CEO of Aon Securities.

Schultz was speaking this morning in London, UK, at the Aon United ILS event, held by the insurance and reinsurance broking giant.

Discussing the current state of the ILS market Schultz was clearly optimistic, both in the way the ILS sector has dealt with the difficult catastrophe loss situation of the last two years and how it is trading forwards, putting learnings from the experience into practice.

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While other jurisdictions are increasingly keen to realise the benefits of facilitating ILS transactions, regulatory oversight and institutions have helped Bermuda maintain its place as the leading domicile for the asset class.

This is according to Alison Dyer-Fagundo, Managing Director of Estera (Bermuda) and Sherman Taylor, Associate Director, Estera (Bermuda), who spoke with Artemis about the Bermuda ILS market, which continues to flourish.

They explained that approximately 80% of the world’s public ILS are listed on the Bermuda Stock Exchange (BSX), which includes ILS vehicles not domiciled in the country.