Investors now see reinsurance as an established asset class and insurance-linked securities (ILS) are seeing strong interest according to a report released Monday (Oct 22).
The global survey of end investors, ILS funds, and buyers reveals that they have predominantly weathered 2017 loss activity with a view that reinsurance products backed by ‘alternative’ capital have become mainstream.
The figures from Willis Towers Watson show that despite the catastrophe losses incurred in 2017, 80% of end investors agreed that 2017 ILS funds’ performance was in line with expectations.
Following last year’s losses, almost half of end investors (48%) tactically increased their ILS allocation while another 16% allocated capital to rebalance ILS to its long-term strategic weight.
End investors perceive diversification (96%) and non-correlation with financial asset classes as key drivers. Relative yield ranked only fourth.
Funds expect to grow
Meanwhile, the clear majority of ILS funds are expecting to grow more than 10% over the next 5 years.
“The industry has widely reported the growth in the ILS market and this comprehensive survey further supports the development of ILS as an asset class despite the challenges of the catastrophe events in 2017,” said James Kent, Global Chief Executive Officer, Willis Re. “For growth to continue, ILS investors will need to demonstrate the ability to innovate and provide optimal solutions to meet clients’ evolving needs. The ILS investors with longstanding and successful track records, supported by consistent and well-regarded management teams, are the ones best equipped for future success.”
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