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Industry Background

AON BENFIELD SECURITIES AND SWISS RE ISSUE REPORTS ON THE INSURANCE-LINKED SECURITIES MARKET

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Aon Benfield Securities has issued its third-annual review of the insurance-linked securities (ILS) market. The review describes the growth that has occurred in the ILS market for the year ending June 30, 2010, including 20 new transactions representing a volume of $4.6 billion. The review also provides a positive outlook for the upcoming year.

Also included in the Aon Benfield review are Aon Benfield’s newly-created indices for its All Bond, BB-rated Bond, U.S. Earthquake Bond, and U.S. Hurricane Bond categories of the ILS market. The indices reflect strong investment returns for 2010, including returns of nearly 13% for both the All Bond and the BB-rated Bond indices, over 15% for the U.S. Hurricane Bond index, and over 7% return for the U.S. Earthquake Bond index. Aon Benfield also provides analyses of the catastrophe bond market and the non-U.S. ILS market, as well as a panel discussion of the ILS market with five active investors.

A report was also issued by Swiss Re that focuses on the ILS market for the first half of 2010. The report provides an overview of new issuance for the first half of the year – which had a volume of $2.5 billion and was comprised of 85% exposure to U.S. Wind risk. Swiss Re’s report also provides analysis of catastrophe bond maturities, trading in the secondary market, and a breakdown of the 3.3% return of its Swiss Re Global Cat Bond Index. Swiss Re’s report also spotlights its recent placement of notes covering U.S. hurricane and earthquake risk for Allianz, and a breakdown of various ILS sector data. Similar to the market review of Aon Benfield Securities, Swiss Re provides a positive outlook for the ILS market.

This post written by Michael Wolgin.

REINSURANCE EXECUTIVES FORM GLOBAL REINSURANCE FORUM

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In response to the financial crisis, eleven chief executive officers have formed the Global Reinsurance Forum (the “Forum”), which seeks to, among other things, represent industry positions before regulatory and supervisory organizations and advocate for a global, reasonable framework for the growth of reinsurance markets. Membership to the Forum will be limited to the chief executive officers, and business issues, such as prices, terms, and conditions, will not be discussed. A press release describes this new organization.

This post written by Dan Crisp.

NEW SIDEBAR AREA REGARDING REINSURANCE MARKET

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Observant readers will have noticed a new addition to the right sidebar of Reinsurance Focus titled Reinsurance Market. In discussions with our clients, many have mentioned the higher reinsurance rates this season, and the particular difficulty in obtaining acceptably priced reinsurance for cat risks. Although the cat bond market basically dried up during the second half of 2008, early 2009 has seen a number of cat bonds successfully issued and sold, using a somewhat different model and cost structure than before. Since our tracking of how many readers view each of our posts reveals that a large number of our readers are interested in such topics, we have added this new area to provide links to publicly available studies and analysis of the reinsurance market and cat risk bond market. It is not our intention to provide “newsy” items in this area, but rather to bring to the attention of our readers particularly thoughtful reports and studies which might provide a basis for creative thinking to help get your company or clients through difficult times. Let us know what additional types of information might be useful to you.

This post written by Rollie Goss.

REINSURANCE AND CAPITAL MARKET INFORMATION FROM GUY CARPENTER

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If you are looking for news and research on the reinsurance market or the capital markets, you may wish to check out a web site maintained by broker/intermediary Guy Carpenter, called GC Capital Ideas. The site is presented in a blog-type format, and contains information with a financial bent, such as reinsurance rates, cat and other claims trends, and alternative risk transfer venues.

This post written by Rollie Goss.

THE BENFIELD GROUP FORECASTS A HARDENING IN THE GLOBAL REINSURANCE MARKET

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The Benfield Group’s October 2008 research report entitled “Global Reinsurance: Capital Consequences – Billion Dollar Question” analyzes the impact of the 2008 hurricane season, the credit crisis, and the financial concerns over XL Capital and AIG on the global reinsurance market. The report states that reinsurers were well prepared for the hurricane season, and, while Hurricane Ike will likely end up as being one of the five most costly insured catastrophe losses, Ike will not be a market changing event by itself. The report then predicts that the 2008 investment returns for most reinsurers will be negative due to the effects of the credit crisis despite the majority of assets being invested in high-quality, fixed-income securities. Finally, the report lists concerns with XL Capital’s recent issues with capital adequacy and investment losses and with AIG’s issues, which include the possibilities of S&P downgrading Transatlantic Holdings (of which AIG owns 59%) and business formerly ceded to AIG being placed in the open market. The predicted result of the combination of these factors is that prices in the global reinsurance market will increase in 2009.

This post written by Dan Crisp.