March 2014/1

The new generation of casualty reinsurers backed by asset managers potentially offer a broader proposition than previous hedge fund initiatives. But they must be able to demonstrate long-term commitment to win over buyers, says Andrew Newman, head of casualty at Willis Re.

Fermat Capital co-founder John Seo said that the cat bond product has developed to "Generation 1.5" as investors take on more complex risk, but it can still progress to the "Gen 2" level.

A panel of state reinsurance buyers said at the Sifma ILS conference held in New York this month that price is not always the driver that leads them to the alternative reinsurance markets.

Catastrophe bonds are not suited to covering flood risk because of modelling issues, inadequate pricing and opaque information about the peril, according to Credit Suisse senior ILS underwriter Rajiv Punja.

Panellists at the Sifma ILS conference questioned whether moving the cat bond market to a multi-model viewpoint is achievable, as they argued that the securities market should remain open to investors without underwriting expertise.

AM Best is receiving enquiries at least once a month from asset managers interested in setting up a rated reinsurer, analysts Steven Chirico and Nick Dranchak told Trading Risk.

Selective Insurance added $100mn of cover to the top of its reinsurance programme for 2014 as the firm said that almost 30 percent of the limit was written on a collateralised basis.

Allstate is considering making the top layer of its reinsurance programme a fully collateralised one-shot cover when it renews on 1 June, sister publication The Insurance Insider has reported.

The California Earthquake Authority (CEA) placed $1.1bn of limit in the 1 January renewals, including $504mn on a two-year basis, according to documents presented at a board meeting in late February.

If Japanese mutual insurer Zenkyoren places more reinsurance limit in the 1 April renewals the additional limit could be seen as "fair game" for alternative providers in a market that has tended to favour traditional relationships, sources said.

Allied World lifts commitment to Aeolus; Blackstone keeps cat bond portfolio stable; Twelve issues second Dodeka; TransRe builds on Pangaea; Kinesis draw-down; Axis Ventures raises $50mn

Amlin plans to focus on increasing "synergies" with its associate ILS fund manager Leadenhall Capital Partners this year as it prepares to increase its stake in the firm above 40 percent or fully buy out management.

Don Kramer's ILS Capital Management has bound about $150mn of reinsurance limit since it began underwriting in the January renewals, sources told Trading Risk.

Gregor Gawron and two other former ILS executives from Falcon Private Bank have re-emerged at Zurich-based investment management firm Dynapartners and are launching a new cat bond fund, Trading Risk understands.

US broker-dealer regulator the Financial Industry Regulatory Authority (Finra) is planning to disseminate pricing and volume information on catastrophe bond trades completed by its members from the end of June.

The flurry of primary cat bond issuance over the past month has sparked secondary trading interest around some of the new bonds, as some ILS traders questioned whether the market is reaching a floor.

Two of the most recent cat bond deals have highlighted the challenges of providing ILS investors with a multi-model view of risk on complex indemnity covers.

Cat bond issuance activity is expected to gather pace heading into the second quarter after strong demand continued to squeeze premiums on recent deals.

New rated reinsurance vehicles may be being driven by investors wanting access to particular asset managers' strategies, but there remains some capital markets interest in casualty risk for its own sake.

Bond insurer Assured Guaranty is looking to offer fronting services to ILS funds, Trading Risk understands.

It's maybe a bit ironic for the editor of a convergence magazine to be sceptical of the impact that new capital vehicles will have on the market.

As two reinsurance vehicles backed by asset managers moved closer to launch this month, casualty market participants are speculating that these new start-ups may lead to a similar revolution to that which has transformed the property cat sector.

PartnerRe is looking to bring capital market investors onto its panel of crop retrocessionaires, Trading Risk can report.