ILS continues its momentum: Survey
End investors, Insurance-Linked Securities (ILS) funds, and buyers – the three groups active in ILS – have predominantly weathered 2017 loss activity with a view that reinsurance products backed by ‘alternative’ capital have become mainstream, according to a new Global ILS Market Survey by Willis Towers Watson.
The unique survey of all three constituents of the ILS market was conducted more than six months after the major 2017 losses. Responses are therefore informed by the crystallisation of ILS funds’ performance.
The survey found that 58 percent of responding cedants use some ILS capacity, with one in four deriving more than 30 percent of their capacity from ILS. Over half of non-users would consider adopting ILS capacity over the next three years.
Close to half of ILS buyers surveyed have recovered claims under their contracts. Almost all reported the collections as a positive experience. Over half of the surveyed members would consider using ILS for non-property cat risks, either as part of a multiline cover or on a standalone basis of which13 percent have already done so.
More importantly, 2017 catastrophe losses have not deterred end investors. About 80 percent have agreed that 2017 ILS funds’ performance was in line with expectations. End investors perceive diversification and non-correlation with financial asset classes as key drivers. Relative yield ranked only fourth.
Post 2017 losses, almost half of end investors (48 percent) tactically increased their ILS allocation. Another 16 percent allocated capital to rebalance ILS to its long-term strategic weight. Only 20 percent of end investors made reductions; post-loss redemptions were few.
