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Convergence Quarterly - where insurance and the capital markets meet
03 November 2008
In our quarterly review of the insurance-linked securities (ILS) market, Karen Eeuwens reports on how ILS is bearing up against the recent financial turmoil, and what the future for ILS holds.
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Alternative forms of risk transfer have slowed to a trickle this year, following two quiet catastrophe years which have flooded the market with capacity.
Last year was a record year for new issuances of ILS, which amounted to $13.72bn. In contrast, by the end of the third quarter of 2008 only $2.8bn of ILS had been issued.
"Capital has been relatively accessible for the past few years," explains David Priebe, chairman of global client development at Guy Carpenter. "Right after Katrina, Rita and Wilma, you saw an increased prominence of alternative sources of capital, particularly sidecars and cat bonds, that filled a much-needed void. Naturally in the years that followed the market has stabilised. This will probably be the first post-Katrina year in which we will not set a new cat bond record."
The financial crisis has also taken its toll on the market, leading investors to tighten...
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