ILS MARKET REMAINS ROBUST F


ifteen years since the first insurance linked securities (ILS) were launched the market


is still growing as more and more organisations choose this method as a way of transferring risk, according to a report by Swiss Re.


The report noted that a growing number


of insurers, reinsurers, governments and corporations are using the capital market solutions to finance growth, manage their capital and transfer risks related to natural catastrophes and other extreme events.


“The ILS market is strong and poised for


continued growth,” says Martin Bisping, head of non-life risk transformation at Swiss Re. “Our investor and sponsor base is made up of stable long-term partners and we consistently generate new interest in the sector. We believe this combination will lead to a continuation of robust ILS market growth.”


This positive outlook was echoed in a recent report by Aon Benfield Securities, which


found that although issuance of cat bonds was slightly down for the first half of 2011 compared with the year before, issuance levels were largely the same.


“Consistency in issuance, including strong


participation from repeat issuers, demonstrates the continued reliance of both sponsors and investors on capital markets capacity,” says Paul Schultz, president of Aon Benfield Securities.


“Renewed interest in sidecar structures also


demonstrates the flexibility of the ILS market to provide fresh capital following market losses. Despite the effects of both the Great East Japan Earthquake on March 11 and the major updates of the RMS US Hurricane and Europe Windstorm models, we anticipate a good catastrophe bond issuance pipeline in the historically active second half of the year. Additionally, we believe the fundamentals are positive for market growth in 2012 and beyond.”


“ Consistency in issuance, including strong participation from repeat issuers, demonstrates the continued reliance of both sponsors and investors on capital markets capacity.”


AS A LEADING PROVIDER OF COLLATERAL TRUST SERVICES FOR THE INSURANCE LINKED SECURITIES MARKET, YOUR WELLS FARGO ILS TRUST TEAM IS PROUD TO SPONSOR ILS INTELLIGENCE.


O


ver the past 10 years, the Wells Fargo ILS and Reinsurance Trust group has established billions of dollars of trusts used to


collateralise ILS, reinsurance and captive programmes worldwide. The cost savings realised by our clients using the WF Trust in lieu of letters of credit (LOCs) is staggering.


There are many benefits to using the WF Trust in lieu of LOCs to


collateralise such programmes. They include: • Saving between 80 and 98 percent of LOC fees • Keeping corporate credit lines available • Retention of the interest income of assets held in trust • Retention of ownership of the assets in trust • Ease of set-up and renewal


The trust concept is simple. Rather than posting a letter of


credit as collateral, our clients deposit cash or cash equivalents (the same cash that they would likely use to collateralise an LOC) into


a legal trust account where the depositor ‘owns’ the money and the transformer (for ILS deals) or cedant (for reinsurance) is the beneficiary of the trust. From a regulatory and carrier perspective, this satisfies the collateral requirement.


The Wells Fargo ILS and Reinsurance Trust team has the well-


deserved reputation as the most knowledgeable and responsive trust group in the industry. So if you are posting LOCs for ILS, reinsurance or captive programmes, or if you are finding your current trustee less than ideal, consider using the ILS or Reinsurance Trust, and please consider Wells Fargo as trustee.


For more information, please contact Robert Quinn on: Tel: +1 203-293-4394 Email: robert.g.quinn@wellsfargo.com Website: www.wellsfargo.com/insurancetrust


November 2011 | INTELLIGENT INSURER | 43


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