Craig Redcliffe: After a period of no growth over the previous few years, largely due to some heavy losses in 2017 and 2018, 2021 saw a return to growth. It’s through a mix of growth at some of the larger existing insurance-linked securities (ILS) managers, the formation of new managers and the launch of new funds.

We’ve seen some significant new ILS bonds, as well. Overall, 2021 has been a period of renewed growth in the ILS market, which is encouraging.

John Huff: 2021 has been a challenging year, and we’re only in the fourth quarter. Some of the losses have been significant. Consider the three headline losses: Winter Storm Uri in Texas, Hurricane Ida and the European floods.

As a result, the ILS markets are under pressure. I heard a CEO say last week that some ILS investors are getting a bit tired. As we approach the 2022 renewals, it will be an area to watch. Some are predicting a very late renewal.

Greg Wojciechowski: Despite the macro challenges confronting the market broader market, we see many positives on the cat bond side of the market. In 2020, issuance totalled around $16.4 billion and 2021 is poised to be a record year for issuance on the Bermuda Stock Exchange (BSX).

The first half of the year was robust and the total number of ILS listed issuers is now at a record level for us. It is also interesting that we have seen more ILS deals incorporated outside Bermuda, as seen by the recent Chinese deal done out of Hong Kong. But many, including that one, are listed on the BSX.

I believe that this is testimony to Bermuda’s tried and tested ILS platform. While new sectors and new areas of support for ILS are emerging, Bermuda has stood the test of time. It has maintained its position as a global centre of excellence for creating, supporting and listing ILS vehicles.

Brad Adderley: It’s been interesting last year; a mixture of good and bad. There is more competition in the market, and we see seeing sponsors who previously used Bermuda potentially using other jurisdictions.

We see a lot of newer jurisdictions. Singapore has accomplished a lot more. More jurisdictions mean more competition, which is a good thing, but it also means more transactions and that‘s positive, especially if they come back to be listed in BSX.

Another positive is that we have seen some fascinating new ILS funds launched, some with substantial capital. We are seeing some funds with close to $1 billion, which is quite impressive. They are doing that within 18 months.

So money is coming in. I think the next phase, and you’ll definitely see Bermuda being the market leader on this, will be around new types of risk being transferred through the new classifications of vehicles.

I believe the sentiment and the mood around ILS is that we’re doing exceptionally well in growing the industry and bringing new items to the marketplace.

Justin Hull: Money has come in but there is also some risk aversion. The new money that has flowed in has primarily gone into the 144A market, rather than middle layer reinsurance. In turn, that has caused spreads to tighten.

Conversely, on the traditional reinsurance side, prices are hardening dramatically due to the losses in 2021. It is a bit counterintuitive that we’d see spreads tighten in the 144A market and the traditional reinsurance rates widen out, but that is what is happening.

Niall Baird: There’s clearly a preference for higher layer, lower volatility stuff that has also been delivering returns. We have to acknowledge there have been some significant losses for investors in the past four years and there is fatigue. That said, all things being equal, returns should look more attractive in 2022 than they have for a long time.

There’s also been a move towards creating more joined-up vehicles, where deals also leverage carriers’ rated paper.

That was triggered by the problem of trapped capital, but it can mean lower costs and ultimately higher returns to better leverage structures. I can’t see that any of these trends are going to shift any time soon.

Video on previous page courtesy of Adobe Stock / Lionel Image courtesy of Shutterstock / Kristina Vackova