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Survey Report

ILS market update Q3 2017

Wake-up call

Insurance Linked Securities

October 19, 2017

This article provides an overview of ILS market activity in Q3 2017.
"Even though this is not 'that year,' the loss activity will provide some inconclusive clues as to what might happen when a $100 billion-plus event occurs."
ILS Market Update Q3

Third quarter brought us typically slow ILS activity coupled with atypical disaster activity ranging from earthquakes in Mexico to Hurricanes Harvey, Irma and Maria. What does this activity mean for the market? Will the market respond as expected? How will ILS influence the broader market?

Note that the ILS world’s first response was the same as everyone else’s: horror and shock at the devastation along with empathy for the people who were affected. This was coupled with appreciation for the efforts of both first responders and medical personnel, and for the efforts of insurers to help policyholders put their lives back together. In addition, ILS investors of all kinds (existing, new and dormant) have been out raising money and preparing to put it to work. Fund-raising discussions by existing investors have gone well as has the emergence (or reemergence in many cases) of additional investors who have been on the sidelines.

Thankfully, we will apparently not learn how well the ILS and reinsurance markets can handle a $100 billion-plus event. While some of the estimates of insured losses are in this range in the aggregate, no single event rises to this level. The multiple events have effectively spread the loss among public and private primary insurers, reinsurers, and ILS investors rather than concentrating the loss more tightly on only one segment as might sometimes be true with a single event.

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