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Press Release

Willis Towers Watson’s 2020 Global ILS Survey finds continued broad appeal of ILS notwithstanding recent tests and ongoing challenges

Insurance Consulting and Technology|Insurance Linked Securities|Investments|Securities
Insurer Solutions

November 18, 2020

LONDON, November 18 2020 – After big tests during the past three years, the Insurance-Linked Securities (ILS) market remains resilient. Most end investors are satisfied with their ILS performance; 86% of ILS funds expect market growth of 5% or more cumulatively during the next five years; more than half of reinsurance and insurance companies surveyed world-wide now use ILS capacity, according to the new Global Insurance-Linked Securities Market Survey Report from Willis Towers Watson, a leading global advisory, broking and solutions company (NASDAQ: WLTW).

Willis Towers Watson surveyed 122 global ILS market participants between June and August 2020 to provide a snapshot of the views of the ILS industry. Participants came from the following four segments: end investors, ILS funds, insurance and reinsurance companies, and corporate risk managers. Almost across the board, ILS funds and end investors expect further growth driven by factors such as the impact of climate change and the positive ESG characteristics of ILS. End-investor respondents identified non-catastrophe weather insurance (64%) and life, accident & health risks (46%) as suitable for ILS mandates, but less than a quarter found appeal in ILS for other perils, with only 5% interested in securitised cyber risk. The survey found that:

  • Over 80% of end investors expect to either increase their ILS allocation in the next 12 months or expect it to be unchanged.
  • About a third of end investors indicated that they had postponed new ILS allocations as a result of COVID-19.
  • At the end of 2019, before any potential impacts of COVID-19, two-thirds of ILS funds reported trapped collateral of 5% or less of their assets under management.
  • Four in five fund manager respondents expect climate change to create significant threats and opportunities for the ILS market during the next five years.
  • The use of ILS remains stable over the last two years with, similar to 2018, over half (56%) of insurers and reinsurers accessing ILS capacity. However, only 17%, down from 27% in 2018, still derive more than 20% of their capacity limit from ILS.
  • 70% of the North American insurers and reinsurers who access ILS capacity derive between 11% and 30% of capacity from ILS, while 70% of their international counterparts say ILS is the source for less than 10% of capacity.

The survey suggests that the ILS market may have adapted more swiftly and effectively than generally reported to the challenges posed by Hurricane Irma and subsequent events over recent years, but the story is not over.”

William Dubinsky | Managing Director Willis Re Securities

William Dubinsky, Managing Director Willis Re Securities, said: “The survey suggests that the ILS market may have adapted more swiftly and effectively than generally reported to the challenges posed by Hurricane Irma and subsequent events over recent years, but the story is not over. Notwithstanding guarded optimism, COVID-19, and continued uncertainty around other property-related losses have created additional challenges for end investors, ILS funds, and cedants alike.

Nadia Schmidt, Alternative Capital Practice Group Leader, Willis Re International, said: “The survey also reveals some disconnects. Insurers and reinsurers would like to use ILS capacity to protect risks beyond natural catastrophes, like cyber and casualty risks, but end investors have little appetite. Investors and funds see steady growth ahead, but some buyers have been more restrained in their behaviour towards ILS. However, these seem to be relatively minor concerns. Overall, our survey reveals that ILS capacity providers and ILS capacity users alike remain committed to the market and feel positively about the health and future of ILS.

Matthew Ball, ILS Consulting Leader, Insurance Consulting & Technology, said: “The survey suggests that the ILS market is continuing to improve in the areas of governance and transparency. In particular, the number of ILS funds appointing independent third-party valuation agents for illiquid (Level 3) assets has increased from a third in 2018 to just over a half in 2020. This is probably not surprising, in light of the catastrophe events of recent years. The end investors agree – they cite the level of reporting and transparency as the most important characteristic of a good ILS fund – above low fees.

Our comprehensive ILS market view reflects the differing perspectives existing within the market. It’s the same connected, integrated approach we use to deliver ILS advice and solutions for our clients.”

Carl Hess | Head of Investment, Risk and Reinsurance at Willis Towers Watson

Carl Hess, Head of Investment, Risk and Reinsurance at Willis Towers Watson, said We collaborated across Willis Towers Watson with input from Corporate Risk & Broking, Investments, Insurance Consulting & Technology, Willis Re and Willis Re Securities. This approach gave us access to all of the relevant market participants. As a result, our comprehensive ILS market view reflects the differing perspectives existing within the market. It’s the same connected, integrated approach we use to deliver ILS advice and solutions for our clients.”

View the full report here.

About Willis Re

One of the world's leading reinsurance brokers, Willis Re is known for its world-class analytics capabilities, which it combines with its reinsurance expertise in a seamless, integrated offering that can help clients increase the value of their businesses. Willis Re serves the risk management and risk transfer needs of a diverse, global client base that includes all of the world's top insurance and reinsurance carriers as well as national catastrophe schemes in many countries around the world. The broker's global team of experts offers services and advice that can help clients make better reinsurance decisions and negotiate optimum terms. For more information, visit Reinsurance.”

About Willis Re Securities

Willis Re Securities, with offices in New York and London, provides capital markets services and products to companies involved in the insurance and reinsurance industry including acting as underwriter or agent for primary insurance-linked securities issuances, operating a secondary insurance-linked securities trading desk and engaging in strategic advisory work. Willis Re Securities is a trade name used by Willis Securities, Inc., a licensed broker dealer authorized and regulated by FINRA and a member of SIPC, Willis Towers Watson Securities Europe Limited (Registered number 2908053 and ARBN number 604 264 557), an investment business authorized and regulated by the UK Financial Conduct Authority.

About Willis Towers Watson’s Insurance Consulting & Technology

Willis Towers Watson’s Insurance Consulting and Technology business has over 1,200 colleagues operating in 35 markets worldwide. It is a leading provider of advice, solutions and software – primarily to the insurance industry. Its consulting services help clients manage risk and capital, improve business performance and create competitive advantage – by focusing on financial and regulatory reporting, enterprise risk and capital management, M&A and corporate restructuring, products, pricing, business management and strategy.

About Willis Towers Watson Investments

Willis Towers Watson’s Investments business is focused on creating financial value for institutional investors through its expertise in risk assessment, strategic asset allocation, fiduciary management and investment manager selection. It has over 900 colleagues worldwide, assets under advisory of over $2.3 trillion and over $112 billion of assets under management.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimise benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas – the dynamic formula that drives business performance. Together, we unlock potential.

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