Insurance-Linked Securities Market Set to Reach New Heights in 2015

NEW YORK, Jan. 15, 2015 (GLOBE NEWSWIRE) -- Following a record-breaking year for insurance-linked securities ("ILS") issuance in 2014, 2015 is set to reach new heights as investor interest in insurance catastrophe risk continues to grow, according to the latest ILS report from Willis Capital Markets & Advisory ("WCMA"), part of Willis Group Holdings plc (NYSE:WSH), the global risk advisor, insurance and reinsurance broker.

Non-life catastrophe bond issuance in the fourth quarter of 2014 totalled USD 2.1 billion, capping the record year which saw over USD 8 billion of non-life catastrophe bonds issued. The previous record-breaking high was USD 7.2 billion in 2007.

Tony Ursano, CEO of WCMA, said: "As investors become more sophisticated, any coverage gaps between reinsurance provided by traditional rated reinsurers and that provided by investors is shrinking – 72 percent of catastrophe bonds used indemnity triggers in 2014, only 30 percent used such triggers in 2007.

"It took over seven years to break 2007's ILS issuance record. In the current climate there are no signs of growth abating and we could very easily see two consecutive record-breaking years. We would not be surprised to see $9 billion of issuance in 2015."

Looking ahead to 2015

Against the backdrop of a reinsurance market reshaping, the WCMA report notes that although issuance is set to rise, market dynamics in 2015 are less predictable.

Commenting on this outlook, William Dubinsky, Managing Director and Head of ILS, WCMA, said: "For some, predictable may be good but uncertainty creates opportunity for those who are prepared to act."

The report highlights three key trends to look out for:

Trend 1: Catastrophe bonds continuing to mirror 2014 collateralized reinsurance

2014 saw the extension of many terms and conditions from the collateralized reinsurance market to the catastrophe bond market. "2015 may see further extensions, including for indemnity-trigger retrocession deals," according to Mr. Dubinsky.

Trend 2: Falling spreads and growing assets under management ("AuM")

"In the absence of any major market moving events we expect spreads to decline and AuM to grow," said Mr. Dubinsky.

However, the report also outlines that the rates of both decline and growth are likely to flatten. "As a reaction, some investors will reach for yield and accept more risk while others may lean towards more transparent risk transfer with modest expected returns," Mr. Dubinsky said.

Trend 3: Large reinsurance buyers challenging the status quo

"Large ceding companies are now active users of the capital markets via catastrophe bonds, collateralized reinsurance and sidecars but some have seemingly reached a plateau in their ILS strategies under current conditions," according to Mr. Dubinsky.

The report notes that companies could move significantly more of their reinsurance to both aggregate coverage and over a much longer term, for example of up to between seven and ten years. "The capital markets can support both these features," Mr. Dubinsky said. "With longer term reinsurance capital in place these companies would have the advantage of being able to rely on stable reinsurance capacity in their underwriting."

The WCMA ILS report, Reaching New Heights, provides detailed breakdowns, charts and insight into the ILS market. Download here.

About About Willis Capital Markets & Advisory

Willis Capital Markets & Advisory, with offices in New York, London and Hong Kong, provides advice to companies involved in the insurance and reinsurance industry on a broad array of mergers and acquisition transactions as well as capital markets products, including acting as underwriter or agent for primary issuances, operating a secondary insurance-linked securities trading desk and engaging in general capital markets and strategic advisory work. Willis Capital Markets & Advisory is a trade name used by Willis Securities, Inc., a licensed broker dealer authorized and regulated by FINRA and a member of SIPC, and Willis Capital Markets & Advisory Limited, an investment business authorized and regulated by the UK Financial Conduct Authority.

About Willis

Willis Group Holdings plc is a leading global risk advisor, insurance and reinsurance broker. With roots dating to 1828, Willis operates today on every continent with more than 18,000 employees in over 400 offices. Willis offers its clients superior expertise, teamwork, innovation and market-leading products and professional services in risk management and transfer. Our experts rank among the world's leading authorities on analytics, modelling and mitigation strategies at the intersection of global commerce and extreme events. Find more information at our website,, our leadership journal, Resilience, or our up-to-the-minute blog on breaking news, WillisWire. Across geographies, industries and specialisms, Willis provides its local and multinational clients with resilience for a risky world.

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