One of the key drivers for some insurance-linked securities (ILS) funds in their strong recovery following September 2022’s hurricane Ian struck Florida is the fact many of the contracts they had written were at higher attachment points, and so have avoided losses.
The improvements to risk-return profile of many ILS Funds at renewals last summer have been continued and possibly accelerated by the 2023 reinsurance renewing.
The collateralized reinsurance, retrocession and catastrophe bond contracts are all underwritten by ILS fund that invests in private ILS arrangements as well as the catastrophe bond.
There has been some evidence of higher attachment points in cat bonds also benefiting funds and their investors, in deal’s that ended up escaping exposure to hurricane Ian that in older vintages might not have, but the effects are much clearer when you look at the collateralized side of the ILS market.
The cat bond market has been operating at the highest levels of reinsurance for many years.