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Inside ILS ISSUANCE ‘IN LINE


WITH 2010 FORECAST’ Aon Benfield Securities says that issuance of insurance-linked securities (ILS) was in line with expectations in the third quarter.


The company issued a report, Insurance–Linked Securities Third Quarter Update 2010, which said that two catastrophe bonds were brought to market during the period, transferring a total of $232 million of risk into the capital markets. As of September 30, 2010, a total of $2.8 billion of new ILS transactions had been brought to market in 2010 and $11.1 billion of catastrophe bonds were outstanding.


Paul Schultz, President of Aon Benfield


Securities, said: “Year-to-date issuance in the ILS market has been dominated by transactions covering US Hurricane, pushing investors’ exposure to previously unseen levels. This phenomenon has led to strong investor demand for insurance-linked securities without US Hurricane risk, in an ongoing attempt to achieve diversification across their portfolios. With some rebalancing of investors’ portfolios and scheduled upcoming maturities, demand for U.S. Hurricane risk will improve into the fourth quarter.”


Secondary trading during Q3 was variable,


with heavy trading volumes in short-dated U.S. Hurricane and Europe Windstorm bonds seen in August and September. Throughout the quarter, investor demand in the secondary market remained strong.


The report also details the Aon Benfield ILS Indices, which posted exceptional returns due to an overall increase in demand for catastrophe bonds and a mild US Hurricane season up to September 30.


INSURANCE—THE ULTIMATE ‘COMMUNITY


PRODUCT’ The industry moves to the centre of global sustainability.


“Insurance is transitioning from the unfashionable branch of the finance sector, to


6 | INTELLIGENT INSURER | November 2010


Intelligence


the ultimate ‘community product,’ enabling populations to share the costs of extreme events at local and global scales,” said Douglas. “This is locating insurance at the very heart of the search for sustainable futures.”


That was the message from Rowan Douglas, Chairman of the Willis Research Network (WRN), and CEO of Global Analytics. The Network’s Chairman explained the WRN’s aim of placing the insurance industry at the epicentre of industrial and social sustainability efforts.


WRN is the world’s largest collaboration


of its kind between academia, industry and government and is part of Willis Group Holdings. Its objective is to marshal the expertise of its international membership base to assess the physical, strategic, operational, and financial risks posed by extreme events.


“From corporate financial stress and bankruptcy


on Wall Street, to poverty and mortality in developing countries, it is increasingly clear each day that our industry’s and our society’s sustainability is inextricably linked to our ability to avoid and manage extremes.


“The obligations imposed by regulators


to ensure our industry has sufficient capital to withstand the maximum probable losses expected once every 200 years are only set to toughen with the introduction of laws like Solvency II, the creation of an Office of National Insurance within the U.S. Treasury, and a reshuffling of financial regulation in Britain. No other branch of the finance industry has to manage to such extreme thresholds of sustainability as part of its everyday operations as ours, so it makes perfect sense to position insurers at the forefront of global sustainability,” said Douglas.


HANNOVER RE BACKS OPEN-SOURCE


EARTHQUAKE MODEL Hannover Re and the GEM (Global Earthquake Model) Foundation have signed a partnership agreement on earthquake modelling and data.


©iStockphoto.com / Claudiad


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