ILS


Market deals in focus: Q2 2021

The ILS market continued to attract record demand in the second quarter of 2021, with new capital coming into the sector outpacing significant maturities of existing assets as investor demand for alternative assets persisted.

The second quarter of 2021 marked another substantial period for the insurance-linked securities (ILS) market as investors continued to pour into the sector seeking diversification and yield from alternative assets.

With returns in many traditional sectors still being suppressed by low key interest rates, the ILS market issued more than $5.6 billion of new property cat bonds in the second quarter, with five of the 19 issuers being first-time players in the market, according to Aon Securities.

Overall, the demand was buoyed by $4.5 billion in expected maturities during the period, but Aon said that investor interest extended far beyond just redeploying existing commitments to the sector, with the diversification and liquidity benefits top of investors’ minds.

Accumulated property and casualty issuances far outpaced maturities at a rate not seen since before the beginning of the pandemic in early 2020, with the new notes taking the total notional amount issued at the half year to $8.5 billion, the highest level on record. Here are some of the biggest deals which moved the ILS market last quarter.

“The ILS market issued more than $5.6 billion of new property cat bonds in the second quarter.”

Wrigley Re 2021-1

Gryphon Mutual Insurance is a carrier formed from the assets of real estate investment holding companies managed by Blackstone and is the sponsor of Wrigley Re. The deal was notable as the first cat bond sponsored by a private equity firm.

The class A notes transaction covers California earthquake losses on a parametric trigger and per-occurrence basis with an annual reset feature, with demand high as the offering priced 20 percent below initial offering.

Baldwin Re 2021-1

Baldwin Re marks a first foray into the ILS market for Vermont Mutual, with the vehicle providing a four-year indemnity reinsurance cover on a per-occurrence basis, with attachments at the 76-year return period.

Baldwin Re 2021-1 was similarly in demand, as investors’ strong demand for the new sponsor and the diversifying risk profile led to a 50 percent upsize in notional placed.

Arch MI MILN

Arch Mortgage Insurance Company (Arch MI) completed its second mortgage insurance-linked note (MILN) transaction of 2021.

Arch MI obtained over $616 million of indemnity reinsurance on a pool representing approximately $36 billion of mortgages from Bellemeade Re 2021-2, the special purpose reinsurer.

Herbie Re 2021-1

Herbie Re 2021-1 provides broad annual aggregate cover on an insured industry loss index basis, offering the most comprehensive coverage of perils and geographies of any insured industry loss index-based cat bond, with more competitive pricing than ultimate net loss retro cover.

Again, investor demand was high for this note, with the transaction growing to more than three times its initial size during marketing, while pricing came in below guidance.

Umigame Re 2021-1

Japanese carrier Tokio Marine’s eighth cat bond and second to take advantage of the ILS incentive schemes in Singapore secured three tranches of $200 million of four-year cover against Japanese typhoon and flood risks.

The $100 million class A-1 notes and $50 million class B notes provide per-occurrence cover, with the offering once again heavily oversubscribed.

The $50 million class A-2 notes similarly provide per-occurrence cover for class A-1 tranche, but also cover second and subsequent events that affect the class B tranche on a per-occurrence basis.

Essent Guaranty XoL

Essent Guaranty, the wholly-owned subsidiary of Essent Group, has obtained $557.9 million of fully collateralised excess of loss reinsurance coverage from Radnor Re 2021-1, the newly formed Bermuda special purpose insurer.

The reinsurance covers mortgage insurance policies written in August 2020 through March 2021.


Image: by Nomad_Soul on Shutterstock.com

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SEPTEMBER 2021


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