April 2014/1

Q What leads ILS premium multiples to vary?

Rules aimed at clamping down on US tax dodgers will land cat bond issuers with new disclosure requirements, but the burden could be lighter than anticipated

Capital market carriers did not really make inroads into the Japanese market at the 1 April renewals, Willis Re International chairman James Vickers told Trading Risk.

A number of Bermudian reinsurers have significantly reduced their net probable maximum loss (PML) figures for major catastrophe events as of 1 January 2014 after topping up on retrocession cover, analysis by sister publication The Insurance Insider's Data Room shows.

The reinsurance market may not have been counting on new demand from the state-backed Florida Hurricane Catastrophe Fund (FHCF) coming to fruition, but the news that the fund did not expect to purchase cover for the 2014 season was still an early negative sign for the June renewals.

Premiums softened by more than expected at the 1 April reinsurance renewals as reinsurers showed they were not prepared to be beaten on price by alternative capital, brokers said.

Southport Re sale; US leads 2013 cat losses; El Niño subdues hurricane outlook; Data developments;

Karen Clark & Company (KCC) is targeting its new RiskInsight platform at users that want to build their own catastrophe risk models, as the market is set to move away from its current reliance on the big three modelling agencies.

Oxbridge Re plans to write collateralised property cat covers for Gulf Coast insurers after raising $26.4mn of net proceeds from its initial public offering on the Nasdaq SmallCap Market.

The AlphaCat-managed PAC Re sidecar is exploring the possibility of expanding beyond property cat into other business lines including casualty treaty, sister publication The Insurance Insider has reported.

Former Max Capital CEO Bob Cooney is working on a reinsurance start-up with former colleague Adam Mullan as Bermuda's hedge fund rush continues, sister publication The Insurance Insider reported.

Comparing two recent soft markets in ILS - northern hemisphere spring 2011 and autumn 2013 - highlights the need to consider other ways of measuring risk than on a straightforward multiple basis, according to a recent report from Lane Financial.

Softening traditional reinsurance rates kept the California Earthquake Authority (CEA) out of the cat bond market in 2013, the company's chief financial officer Tim Richison said at the Trading Risk Sifma roundtable.

Nephila syndicate posts debut profit; Catco launches Aquilo fund with $110mn; Investors back life (re)insurers

Alternatives investment adviser K2 Advisors has been quietly offering a fund-of-funds for the ILS sector, Trading Risk understands, while ILS Advisers has also launched such a vehicle in the past month.

ILS fund managers' first quarter returns this year are lagging behind those in the same period of 2013 following a year of market softening, according to results from a group of seven cat bonds tracked by Trading Risk.

ILS rates-on-line (RoLs) took their sharpest drop in the first quarter since the same period of last year, according to the Willis Capital Markets & Advisory RoL index.

Japanese earthquake industry loss warranty (ILW) covers have softened by 25 percent year-on-year at the $10bn trigger level, according to pricing sheets obtained by Trading Risk.

The largest price rises on the secondary cat bond market have been seen at both the very low and very high risk ends of the ILS spectrum over the past month, traders told Trading Risk.

American Strategic's $200mn Gator Re is understood to be the first cat bond that provides annual aggregate reinsurance cover without having franchise deductibles in place.

Several new sponsors came to the cat bond market in the first quarter, with a further surge in early April.

Several ILS fund managers considered listing new closed-ended vehicles in the past few months but plans for further additions have been put on hold as investors are wary of the current yield environment, Trading Risk understands.

Capital market participants are ramping up efforts to participate in the energy insurance market through parametric deals such as Gulf of Mexico (GoM) "cat in a box" wind products, Trading Risk understands.

Earlier this year we covered a speech from Scor CEO Denis Kessler, in which he suggested that the ILS market had been fuelled by ultra-low interest rates - and that the end of quantitative easing in the US would lessen the sector's appeal.