Catastrophe bonds are set to buck the trend elsewhere in the insurance-linked securities (ILS) market, with a strong issuance pipeline for the fourth quarter of 2020 and first quarter of 2021, according to Des Potter, Managing Director, ILS origination and structuring at GC Securities*.
Speaking to Artemis on the reduced availability of collateralized aggregate protection, Potter noted: “We’re seeing a shift away from collateralized reinsurance into the bond market to try to reduce some of the pressure that may exist because investors in the collateralized reinsurance space are pulling back. We’re expecting to see quite an active fourth quarter in terms of catastrophe bond issuance.”
Potter also opined on the impact of COVID-19-related uncertainties for institutional investors: “Pre-COVID, the collateralized reinsurance component of ILS as an asset class was on the watch list for certain investors. That’s mainly due to historic performance and the surprise contribution of some of the recent losses, as well as general concerns about the impact of climate change.”
*Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities LLC, a US registered broker-dealer and member FINRA/NFA/SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Securities or investments, as applicable, are offered in the European Union by GC Securities, a division of MMC Securities (Europe) Ltd. (MMCSEL), which is authorized and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC. MMC Securities LLC, MMC Securities (Europe) Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan Companies. This communication is not intended as an offer to sell or a solicitation of any offer to buy any security, financial instrument, reinsurance or insurance product.