Hurricane Erick makes landfall in Mexico at 950mb, reducing risk to World Bank cat bond

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Major hurricane Erick has made landfall on the coast of Mexico with 125 mph sustained winds in the state of Oaxaca and the NHC reports the minimum central pressure at 950mb, which is above the level where the World Bank facilitated $175 million IBRD CAR Mexico 2024 (Pacific) parametric catastrophe bond would be triggered.

hurricane-erick-mexico-catastrophe-bond-3As we reported earlier this morning, hurricane Erick intensified rapidly to become a major category 4 storm, with sustained winds of over 140 mph and a minimum central pressure estimated at 939mb.

As we said in our earlier article, that central pressure was only two millibars above the level needed to activate a partial payout from the IBRD Mexico Pacific coast hurricane catastrophe bond.

The trigger threshold where a payout would be due from the World Bank parametric catastrophe bond, which provides Pacific coast named storm disaster insurance to the government of Mexico, is for a storm with a central pressure at or below 937mb to breach the parametric named storm box drawn near to the coastline.

As we said in our second update on the hurricane’s potential threat to the catastrophe bond, as of 09:00 UTC the National Hurricane Center had updated its estimate to a 940mb minimum central pressure, so slightly higher.

Now, with dangerous major hurricane Erick having made landfall, the minimum central pressure at that time, 12:00 UTC, is reported at an estimated 950mb, so higher still and further away from the threshold for the parametric cat bond to face a payout.

It’s important to note that there could still be some uncertainty, but sources we’ve now spoken with in the last hour do not believe the catastrophe bond will face a payout, unless the reported central pressures were revised down.

Suggesting that, investors will now view the risk to Mexico’s Pacific coast named storm catastrophe bond as greatly reduced. Although the view of risk may not subside completely until some analysis on how the central pressure extrapolates along hurricane Erick’s track, at the point it would have breached the parametric box for the cat bond, has been completed.

But, with the central pressure so much higher at landfall and never having been reported as low as would have been needed to trigger the cat bond, it’s possible that an official calculation agent report may not even be deemed necessary for this hurricane event.

Significant impacts are anticipated for the landfall region from hurricane force winds and storm surge, while double digit inches of rainfall are anticipated further inland, so the threat to the local area remains meaningful.

However, the mountainous region of Oaxaca, Mexico where landfall has occurred is expected to degrade hurricane Erick rapidly now.

You can read all about the IBRD CAR Mexico 2024 (Pacific) catastrophe bond and more than 1,000 other cat bond transactions in the extensive Artemis Deal Directory.

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Hurricane Erick threat to Mexico cat bond could reignite parametric trigger debate: Icosa

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Were major hurricane Erick to trigger the $175 million IBRD CAR Mexico 2024 (Pacific) catastrophe bond that provides disaster insurance to the Mexican government, it could reignite the debate surrounding parametric triggers, given the recency to another trigger event with hurricane Otis back in 2023, Florian Steiger of Icosa Investments has suggested.

hurricane-erick-mexico-catastrophe-bond-2As we reported earlier this morning, hurricane Erick intensified rapidly to become a major category 4 storm, with sustained winds of 140 mph and a minimum central pressure estimated at 939mb.

As we said in our earlier article, that central pressure was only two millibars above the level needed to activate a partial payout from the IBRD Mexico Pacific coast hurricane catastrophe bond.

However, it’s worth pointing out that a fresh update from the NHC now has the minimum central pressure of hurricane Erick very slightly higher at 940 mb, so now 3 millibar above the trigger pressure.

Update: A further landfall update at 12:00 UTC states that hurricane Erick made landfall with 125 mph sustained winds and a minimum central pressure of 950mb, according to the NHC. So pressure was above the trigger point for the cat bond and did not seem to drop below at any stage as the hurricane approached landfall.

Icosa Investments, the specialist catastrophe bond fund manager, has commented, “Tropical Storm Erick, which formed off Mexico’s Pacific coast, has intensified into a Category 4 hurricane within just a few hours. With sustained winds exceeding 230 km/h, the storm poses an imminent threat and is expected to cause severe damage. Landfall is anticipated later today.

“Unlike in the United States, only a small number of cat bonds cover hurricane risks in Mexico. The current exposure is concentrated in a single IBRD instrument, representing just over 0.3% of market weight. As with most IBRD transactions, this bond relies on a parametric trigger. If the storm’s central pressure at landfall falls below a predefined level, a payout, either partial or total, is made. Such a total loss appears unlikely at present, but it cannot be entirely dismissed, whilst a partial payout is certainly within the realms of possibility as the latest reported pressure is only marginally above the payout threshold.

“Definitive clarity will likely not arrive for several days, because the National Hurricane Center may revise its datasets retroactively. Meanwhile, the bid–ask spread on the affected bond is likely to widen significantly.”

CEO of Icosa Investments Florian Steiger further stated, “Rapid intensification in the Pacific is once again front-page news for cat-bond investors. A fast-strengthening storm now threatens to cause a partial-payout of yet another parametric cat bond, echoing recent experience with Hurricane Otis, which also intensified to major hurricane status within a few hours in almost the same region.

“Such an additional default of a Mexican parametric bond in such short order is bound to reignite debate about trigger design, basis risk and whether the market is truly pricing rapid-intensification exposure. It may also stretch investor patience with parametric structures, whose mixed performance in recent years is already under the microscope.”

Read our earlier article for more on the situation with major hurricane Erick and Mexico’s Pacific coast named storm parametric catastrophe bond.

You can read all about the IBRD CAR Mexico 2024 (Pacific) catastrophe bond and more than 1,000 other cat bond transactions in the extensive Artemis Deal Directory.

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Major hurricane Erick puts Mexico parametric Pacific coast IBRD cat bond on-watch

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Rapid intensification of tropical storm Erick into a major hurricane has brought Mexico’s Pacific coast hurricane parametric catastrophe bond, the $175 million IBRD CAR Mexico 2024 (Pacific) issuance, sharply into focus, as Erick’s central pressure is estimated just a couple of millibars above where the trigger for attachment sits.

Hurricane Erick, Mexico, catastrophe bondAt this time, major hurricane Erick has reached category 4 strength, with sustained winds estimated by the National Hurricane Center at 145 mph, with gusts estimated at over 170 mph.

In the next few hours, the centre of Erick is forecast to make landfall near to the border region between the Mexican states of Oaxaca and Guerrero this morning.

In the latest update from the NHC, major hurricane Erick’s minimum central pressure is estimated at 939 mb and the agency says some further intensification is possible before landfall, after which weakening is anticipated.

Artemis has learned that the minimum central pressure of a hurricane that is required for any activation of a payout from the Mexican government’s World Bank supported IBRD Pacific storm cat bond is 937 mb, so just 2 mb away from the latest storm pressure estimate for Erick.

Updates: A fresh estimate from the NHC at 09:00 UTC put the estimated minimum central pressure for hurricane Erick a millibar higher, at 940mb.

A further landfall update at 12:00 UTC states that hurricane Erick made landfall with 125 mph sustained winds and a minimum central pressure of 950mb, according to the NHC. So pressure was above the trigger point for the cat bond and did not seem to drop below at any stage as the hurricane approached landfall.

In that region along the coast from the Mexican states of Oaxaca into Guerrero, in order for a 25% payout of the catastrophe bonds $175 million of principal to come due, a storm must cross into the parametric box with a minimum central pressure of between 937 mb and 931 mb.

Depending on where the landfall occurs, a higher payout of principal could be due further up the coast near to Acapulco, we are told, while a more intense storm with a pressure that dropped below 931 mb could drive a 50% or higher payout for the catastrophe bond. It’s important to note that we believe the parametric trigger works on a sliding scale, so while the minimum payout for the notes is 25%, it can be any percentage above that depending on the pressure and location it crosses the parametric box.

Based on the latest NHC data, for an estimated central pressure of 939 mb, hurricane Erick only needs to deepen by 2 millibar before it breaches the parametric named storm box for investors in the Mexico Pacific coast catastrophe bond could be on the hook for a payout.

It can take some time for payout determinations to be made with parametric catastrophe bonds such as this, given the use of official NHC reports to make that final decision.

In this case, we understand the Pacific coast IBRD catastrophe bond utilises the Automated Tropical Cyclone Forecast best-track data files for that.

In the most recent case of one of the Mexican government’s catastrophe bonds paying out, hurricane Otis caused a just under 50% payout with that storm making landfall in October 2023, but the final report being delivered by March 8th 2024 and then payout not being made until late March or April of that year.

So, should hurricane Erick deepen and its central pressure be reported closer still to the thresholds required, it could take weeks or months for clarity to be understood, about whether the Pacific coast catastrophe bond has been triggered, or not.

With just 2 millibars between the latest central pressure and the initial threshold for attachment to begin for this cat bond, depending on landfall location and where pressure sits as it is extrapolated across the parametric box, holders of the IBRD Pacific coast catastrophe bond notes could be in for a nervous few hours as they wait for the next report from the NHC to then make their own estimations for where pressure could have been as the box was crossed.

Finally, it’s worth noting that storm chasers have provided inputs to NHC best-track data in the past, through provision of on-the-ground readings of central pressure and the catastrophe bond market has experience of that with hurricane Patricia back in 2015.

Morgerman is once again on the ground in Mexico hoping to intersect the eye of major hurricane Erick and will no doubt record pressure readings if he is successful. Something to watch out for and that could provide helpful data to provide an earlier idea of the pressure at landfall, although no necessarily at the point where the parametric named storm box line is crossed.

We’ll update you should hurricane Erick pose a major threat to the notes, although given landfall is just hours away now we may not see any further central pressure updates before the storm has already crossed the parametric line.

Whether the cat bond is really threatened, or not, the threat to lives, livelihoods, property and infrastructure is clear.

The NHC warns in its latest update, “Erick is now an extremely dangerous category 4 hurricane, and devastating wind damage is likely where the core moves onshore. Weather conditions are already deteriorating in the warning area, and preparations to protect life and property should have been completed.

“Erick will produce heavy rainfall across portions of Central America and Southwest Mexico through this week. Life-threatening flooding and mudslides are likely, especially in areas of steep terrain.

“A dangerous, life-threatening storm surge is expected to produce coastal flooding near and to the east of where the center crosses the coast, in areas of onshore winds. The surge will be accompanied by large and destructive waves.”

You can read all about the IBRD CAR Mexico 2024 (Pacific) catastrophe bond and more than 1,000 other cat bond transactions in the extensive Artemis Deal Directory.

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Parametric specialist Descartes secures investment from Battery Ventures

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Descartes Underwriting, the parametric risk transfer specialist, has secured a strategic investment from Battery Ventures, a global technology-focused global investment firm.

descartes-underwriting-logoThe transaction was executed at a premium to Descartes’ most recent Series B valuation. It allows Battery to join the organisation’s shareholder base, while all existing investors retain a substantial  majority of their holdings.

As part of the transaction, Marcus Ryu, Partner at Battery Ventures and former Chief Executive Officer (CEO) and co-founder of Guidewire Software will join Descartes as a board observer.

Tanguy Touffut, CEO and co-founder of Descartes, said: “Over the past six years, Descartes has established itself as the leading parametric insurance business for climate-related risks, remaining true to our scientific approach to risk transfer.

“As we scale globally to address the widening protection gap around natural disasters, we’re thrilled to welcome Marcus — one of the world’s most accomplished Insurtech entrepreneurs — whose experience and vision will be invaluable as we execute our ambitious roadmap.”

Adding: “Battery’s investment is a major endorsement of our mission and a strong signal of our commitment to the North American market, already our largest market.”

Ryu, also commented: “Over twenty years of serving the global P&C insurance industry informs my keen interest in applying technology to address the enormous underinsurance gap.

“Parametric insurance is one of — if not the — most promising approaches to transfer risk efficiently, and like many industry participants I believe it will continue to grow in importance and adoption.”

Ryu continued: “The team at Descartes Underwriting is uniquely credentialed in this domain, and I am very impressed with the market and thought leadership position they have built with brokers, capacity partners and insureds in a short period.”

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SV SparkassenVersicherung eyes future cat bonds after Liongate Re debut: CFO

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SV SparkassenVersicherung (SV) is setting its sights on future catastrophe bond activity after making its market debut earlier this year with the $100 million Liongate Re DAC issuance, a landmark deal co-sponsored with Japan’s Zenkyoren.

According to SV Chief Financial Officer (CFO) Roland Oppermann, the transaction not only overcame long-standing barriers for the regional German insurer but also paved the way for future capital markets engagement.

As Artemis previously reported, the debut Liongate Re DAC catastrophe bond was successfully priced and finalised to provide Japanese mutual Zenkyoren with $100 million in aggregate earthquake reinsurance on an indemnity trigger basis, while also providing a source of German parametric triggered quake reinsurance cover for SV SparkassenVersicherung.

Speaking to Artemis, Oppermann described how the German regional insurer overcame pricing, reputation, and structural hurdles by collaborating with Zenkyoren, Japan’s largest mutual insurer, to co-sponsor a joint cat bond.

Firstly, we asked Oppermann to explain what the key drivers behind SV’s decision were to sponsor its first catastrophe bond.

“It didn’t come suddenly. We had been thinking about issuing a catastrophe bond for quite some time. I’ve been with SV for eleven years now, and I think we seriously considered it three times during that period,” Oppermann said.

“Each time, we ended up not pursuing it because we saw a significant price gap between traditional reinsurance and issuing a cat bond, especially in Europe. That gap tends to be larger here than in the U.S. or Asia.”

A key factor that Oppermann highlighted is that SV didn’t have a reputation in the capital markets, and there’s often an additional cost associated with being new sponsor.

“So, we asked ourselves: is there a way to do this together with a well-established partner? We had some experience in the Japanese market already and were looking for partners on the traditional reinsurance side. That’s when we began discussions with Zenkyoren,” the CFO went on.

“Initially, we talked about exchanging risk: they would take on our earthquake exposure and we would take on theirs. That would have given both of us diversification. But from a regulatory perspective, Japanese mutuals aren’t allowed to sign foreign risks, so that idea wasn’t feasible.”

“Still, the conversations with Zenkyoren continued, and we realized there were a lot of similarities between our organizations. They are restricted to operating in Japan; we’re restricted to a part of Germany. So, both of us have high concentration risk and little geographic diversification. They come from the mutual insurance space; we come from the public sector insurance side and are not publicly listed as well. But we share a similar mindset, both are very traditional, very conservative institutions.

“So that sparked the idea of working together, and ultimately led to what I think is a very innovative joint bond.”

We’ve previously explained that this new cat bond is innovative for two reasons. Firstly, as we understand it is the only catastrophe bond to ever provide parametric earthquake protection covering risks in Germany and a very rare European parametric quake deal in catastrophe bond, or similar, format.

Secondly, is the way it has provided a shared limit for two ceding beneficiaries, one being Japanese mutual Zenkyoren, the second being SV SparkassenVersicherung with that reinsurance limit also being shared across an indemnity aggregate cover and a parametric cover as well.

“Zenkyoren has one of the largest reinsurance programs for elemental perils globally, and they have a lot of experience in issuing catastrophe bonds. Their Nakama Re series is a well-established structure in the market,” Oppermann further explained.

“The concept was that we would effectively replace part of their Nakama Re bond. The risk profile that Zenkyoren would have issued in Nakama Re, we took over in a traditional reinsurance contract from them. We then placed that same risk profile into our bond and added our own earthquake risk in Germany.”

“The bond includes two risk components. Zenkyoren’s Japanese risk, which is structured on an indemnity basis, and our German earthquake risk, which we chose to structure parametrically.”

The CFO continued: “We went with a parametric model because we wanted to make the cat bond easier for investors to assess. Since this was our first issuance, we didn’t want to overwhelm the ILS community with complexity. Parametric structures tend to be well understood and well-liked by cat bond investors. They offer transparency and simplicity.”

Oppermann believes the partnership route could appeal to other insurers in a similar position.

“This structure was a win-win: for us, for Zenkyoren, and for investors. It may be a model for how smaller insurers can enter the ILS space, by teaming up, aligning risk, and presenting something that’s both innovative and familiar.”

The Liongate Re DAC catastrophe bond also arrived amid broader conversations in Germany about insuring against elemental perils, particularly in the wake of major flood events like Bernd. Should mandatory coverage be introduced, SV sees potential to extend its ILS involvement.

“If the market needs more reinsurance capacity, we’re now better positioned,” Oppermann said.

“We’ve built the relationships, we understand the process, and we’re no longer new to the capital market.”

And finally, Oppermann revealed to Artemis whether there are other perils that SV might consider covering in future ILS transactions.

“Yes, we’re certainly considering that. In Germany, there’s an ongoing political discussion about introducing mandatory insurance for elemental perils. Events like the Ahr flood, which was one of the largest heavy rainfall disasters in Europe, highlighted just how underinsured the country is for those risks,” the CFO explained.

“For us, it’s good that we already have a first step into the ILS market. If that demand for reinsurance materialises, we’re in a position to return to the capital markets, potentially placing elemental perils as part of our program,” he concluded.

As a reminder, you can read all about this new Liongate Re DAC catastrophe bond and every other cat bond deal in the extensive Artemis Deal Directory.

Read all of our interviews with ILS market and reinsurance sector professionals here.

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Jamaica builds on parametric disaster risk financing for 2025. Cat bond remains core

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The Government of Jamaica has prepared itself for the 2025 hurricane season with a further increase to its National Natural Disaster Risk Financing Policy arrangements, with the largely parametric reserves and contingent financing augmented with parametric insurance and its World Bank catastrophe bond.

Flag and map of JamaicaIn March this year, the Jamaican Ministry of Finance negotiated a further J$6.5 billion contingent financing arrangement, which we believe was in the form of a World Bank supported Catastrophe Deferred Drawdown Option (CAT DDO).

In addition, the Jamaican government has meaningful layered protection from a range of instruments, made up of its own reserves and contingent disaster financing, contingent instruments from international partners, parametric insurance from the CCRIF and its catastrophe bond that sits at the top of the layered financing tower.

In a speech last week, Minister of Finance and the Public Service, Fayval Williams, disclosed the additional disaster risk financing and explained the layered approach Jamaica has adopted.

Her comments are an excellent example of how a government can, over time, reach a stage of maturity in its disaster risk financing arrangements that leaves it prepared for most eventualities, with a range of structures, instruments and sources of capital designed to respond to different return-period catastrophe events.

It’s an example other countries take note of, as Jamaica now has one of the most sophisticated disaster risk financing approaches in the world, with private markets and capital augmenting its own reserves and development banks contributions, while the structures are largely parametric in the way they would be activated by a disaster event.

Williams explained, “In the face of what we know to be increased intensity of weather related events, we would have been in a very bad place when Beryl struck if we had not implemented our National Natural Disaster Risk Financing Policy.

“It has many layers of what we call shock absorbers for the economy. Since then, we have increased our disaster coverage to ensure we have the financial flexibility to meet natural disasters.

“The NNDRFP allows the government to prepare financially for natural disasters, the policy ensures funds are available for response and recovery efforts. Had this government not had the foresight to ensure we had this multi-layered risk absorbing facility in place when category five hurricane Beryl hit, we would not have been able to do the emergency repairs to public infrastructure, clean up and relief recovery activities, as well as the social expenditure to assist vulnerable populations.

“Currently, our NNDRF cushion stands at approximately $130.6 billion in terms of coverage. How much we can draw-down on that will depend on the severity of the disaster. Our disaster financing policy takes into consideration those events that are high frequency but low severity, such as floods, and these can be dealt with through budget reallocation or reserve and the contingency funds to provide immediate resources for relief efforts.

“For the higher-severity, low-frequency events, such as hurricanes, we have to use insurance instruments, such as the facility that we have with CCRIF, our Caribbean partner.

“It says in times of disaster, our policy that is, start with what we can reallocate, what we can defer, what we can delay or cancel and if that is not enough, go to the next layer, the contingency fund and the National Disaster fund. This is $4.8 billion. Then you go to the National Natural Disaster Reserve Fund that has $1 billion dollars. Together these two funds total $5.8 billion and are Jamaica’s own resources.

“If those are not enough, the next layer would be two contingent credit arrangements, thanks to our international partners, and I’m pleased to note that on Tuesday, March 4th 2025, an additional facility was added for an amount of $6.5 billion to bring the disaster coverage for Jamaica, again, just to reiterate that number, to $130.6 billion.

“Of course, how much we can access will depend on the severity of the disaster.

“An advantage of the catastrophe financing coverage we have in place is that it is parametric, meaning there are predefined thresholds and predefined payouts. So, if the thresholds are met, funds are triggered and the recovery work can get started almost immediately.

“Compare this with traditional insurance, in which there would have to be a detailed damage assessment, which, as you know, could take months of back and forth and agreeing and disagreeing about what’s damaged what’s not damaged.

“During that time, as you can imagine, of this detailed damage assessment, you could see how people, the infrastructure and the GDP of the country would be suffering, and how slow that process would be in addressing recovery efforts.

“The commitment of this government is to continue strengthening our multi-layered National Natural Disaster Risk Financing policies and to fill in any gaps that we have.

“I will always give former Minister Nigel Clark credit for the work that he started to establish this. We are continuing that work and are ensuring that these facilities remain in place for the benefit of the people of Jamaica, because we understand our geographic location in a hurricane belt, and that we need to be prepared well ahead of that. Not thinking when we are in it, what we are going to do? But we would have already had the plans and the financing in place to support that.”

$130.6 billion Jamaican dollars equates to around US $815 million, so a very meaningful capital buffer to protect the country against severe weather and natural catastrophe events.

The World Bank facilitated $150 million parametric IBRD CAR Jamaica catastrophe bond sits at the top of the financing tower, for any particularly catastrophic disaster impacts the country could face.

While the cat bond did not pay out for hurricane Beryl, receiving some unwarranted criticism for that, it was evident that Jamaica’s layered approach to financing its disaster risks was more than adequate for the impact of that storm and now the cat bond coverage remains available for any significant hurricane impacts through three more hurricanes, up to the end of 2027.

Recall that, the catastrophe bond was always designed to protect the residual risk at the top of Jamaica’s disaster risk financing tower of arrangements.

While, after Beryl, Jamaica’s Minister of Finance at the time, Dr. Nigel Clarke, had explained that not every risk transfer instrument was designed to trigger for every storm event.

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ILS gain ground as ESG diversification tool: IPS Capital’s Maida

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As investors grapple with the challenges of market concentration, rate uncertainty, and sustainability underperformance, insurance-linked securities (ILS) are emerging as a compelling solution for ESG-focused portfolios, according to Tiziana Maida, Head of Research at investment management, wealth planning and consulting specialist IPS Capital LLP.

In a recent commentary, Maida outlined how IPS Capital incorporated ILS into its ESG portfolios in the fourth quarter of 2024, highlighting the asset class’s diversification benefits and alignment with environmental and social goals.

“With this scenario in mind, we have focused on alternative investments that are not exposed to the risk of higher rates for longer, such as insurance-linked securities which we have added to ESG portfolio in Q4 last year,” she said.

“By their nature, ILS align well with our commitment to environmental, social, and governance principles as they play a crucial role in addressing climate change-related events,” Maida explained.

Maida also pointed out that beyond financial returns, ILS contribute to real-world resilience.

“ILS help insurers and reinsurers manage these growing risks. By investing in these products, we can then support the insurance industry’s ability to provide coverage for climate-related events, enhancing social resilience and providing financial support for rebuilding efforts after natural disasters,” she added.

The short duration of ILS, which is typically up to one year, makes them particularly adaptable to climate risk, as they can reprice annually to reflect changing environmental conditions.

As Maida goes on to note, this provides investors with updated compensation for emerging climate exposures.

In addition, Maida also highlighted the asset class’s growing recognition within the sustainable finance framework.

“A significant portion of ILS assets are now classified as Article 8 under the European Union Sustainable Finance Disclosure Regulation (SFDR), highlighting their sustainability focus,” she explained.

Adding: “Moreover, ILS are increasingly being used with a development angle, such as bonds issued to protect against earthquake risk in developing countries. This approach allows investors to support disaster risk financing in developing nations, aligning with sustainable development goals.”

She continued: “The financial benefits of these products also offer a compelling narrative. They often offer favorable terms compared to corporate bonds of similar credit quality. ILS are trading on an average spread of 8.8% over the risk free and they display a current average expected credit loss of just over 2% which compares favorably to the 3.2% credit loss for global high yield bonds as reported by the credit rating agency Moody’s.”

Amid growing market volatility, climate risks, and pressure on ESG strategies to deliver, Maida views ILS as a unique asset class that combines strong return potential with risk resilience and measurable impact.

“By incorporating ILS into our investment strategy, we are not only potentially enhancing returns and diversification but also contributing to a more resilient and sustainable global economy,” Maida concludes.

Furthermore, IPS Capital’s Chief Investment Officer Chris Brown recently noted that, “Our insurance linked securities are unaffected by tariff noise (which is of course one of their core attractions) and are also up for the month and year so far.”

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ILS Is fundamental to market evolution and growth: McKeown, Vantage Risk

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In a rapidly evolving re/insurance landscape, Vantage Risk is positioning itself at the forefront of innovation and adaptability, particularly in the insurance-linked securities (ILS) space.

chris-mckeown-vantageSpeaking with Artemis, Chris McKeown, Chief Executive, Reinsurance, ILS, and Innovation, at Vantage Risk, outlined how the firm is approaching capital deployment, navigating current market dynamics, and leveraging ILS to drive sustainable, long-term growth.

The firm has deployed a substantial amount of its $1.5bn partnership capital raise, and expects to deploy remaining capacity of appx. $100 million over the next month. According to McKeown, the firm’s strategy has been shaped by both opportunity and caution.

“We’re ahead of where we were last year,” McKeown said. “The reinsurance market is front-loaded, with most opportunities appearing between January and July. We’ve maintained a focus on demand-driven, customized solutions that differentiate us in an increasingly crowded marketplace.”

A key part of this deployment includes a deliberate allocation to aggregate structures, where underwriting discipline is paramount, and these structures help craft a more diversified investment portfolio.

“These structures require more robust analysis than traditional per-occurrence products. That’s where our data and analytics capabilities provide real advantage, with approximately a quarter of our colleagues devoted to driving insights for underwriters,” McKeown added.

This tailored approach helps Vantage stay competitive, especially in a softening market.

“As supply grows, we need to be more creative with our portfolio. We’re focused on delivering large capacity and swift execution through bespoke deals that meet specific client needs,” McKeown said.

McKeown emphasized that ILS is not just an ancillary part of Vantage’s strategy, it’s foundational to the firm’s future.

“We see ILS as absolutely fundamental to how the market continues to evolve and grow,” he said.

“It gives us access to more capital and supports product development, it brings transparency, promotes product innovation, and disciplines the P&L through frequent and rigorous investor reporting.”

ILS also offers access to deep, scalable capital that may not be available through traditional reinsurance channels during times of market stress. “That kind of capital, when properly managed, allows us to develop new products and extend coverage in ways that wouldn’t be possible relying solely on our balance sheet,” McKeown added.

He cited Vantage’s use of Bermuda’s segregated cell technology as an example of the structural innovation that ILS makes possible. “These structures have helped push the entire market toward greater operational efficiency and clarity.”

Moreover, McKeown acknowledged that while margins in the property catastrophe space have come down slightly since 2023, investor appetite for ILS remains strong, provided the value proposition is clear.

“ILS remains non-correlating and provides tail protection in an investor’s portfolio,” he said.

“Given the diversifying nature of re/insurance, it almost always makes sense to have some allocation to this asset strategy, even in parts of the market cycle where we may see softening pricing.”

More importantly, Vantage is seeing increased interest from investors in other lines of business.

“We’ve had a lot of discussions around expanding into marine, energy, aviation, and cyber. These areas offer different market cycles and return expectations, which can help balance an investor’s exposure beyond just property cat,” McKeown explained.

Ultimately, McKeown sees flexibility and alignment as core tenets of Vantage’s ILS strategy.

“We’re not just an asset-gathering platform. We’re here to ensure that every line of business we write delivers a return that resonates with investors,” McKeown concludes.

Read all of our interviews with ILS market and reinsurance sector professionals here.

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ILS appetite grows for EU aggregate cat cover as cedants seek earnings protection: Gallagher Re’s Dowlen

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European insurers are increasingly revisiting aggregate catastrophe cover to protect against high-frequency events, with alternative capital providers showing greater interest in supporting these structures, according to Hamish Dowlen, Managing Director and Head of EMEA at Gallagher Re.

Dowlen spoke to Artemis about the renewed demand for frequency protection across Europe, the evolution of reinsurer strategies in response, and how insurance-linked securities (ILS) markets are identifying aggregate structures as an area of growing opportunity, particularly as cedants grapple with elevated retentions and a multi-peril environment.

“Increasingly, we’re having conversations with clients who say: if the frequency in any one year gets to a level where we’re having to retain that kind of per-event loss again and again, then we’re very interested in buying something that will cap that,” Dowlen said.

He noted that the supply of aggregate capacity had declined in recent years, but market conditions are shifting.

“In the last few years, a lot of those aggregate covers fell by the wayside, either because the structures were no longer sustainable, or the pricing wasn’t at a level that cedants found acceptable. But now, we’re in a situation where the market has become a little more flexible. We’ve identified solutions that are placeable.”

While the resurgence in demand spans much of the continent, the German-speaking markets remain a focal point.

“Germany, Austria, and Switzerland traditionally bought more aggregate cover than other European markets. So they’ll be particularly interested in what’s available going forward,” Dowlen explained.

Asked about ILS involvement in these structures, Dowlen confirmed a growing role for alternative capital.

“Yes, we absolutely do see growing interest. I think all reinsurers, both traditional and ILS, are assessing where they want to play in the European markets, and aggregate is an area where they see the chance to differentiate themselves.”

While he does not expect ILS to dominate, Dowlen sees it as an important complement.

“I don’t believe ILS will become the dominant force in the European aggregate market, but I do think there’s an opportunity for it to play a greater role. I expect that will grow over the next few years.”

He also stressed that traditional capacity remains active and committed.

“There’s still a lot of traditional capacity out there from European reinsurers, as well as from Bermuda and London. Those reinsurers are very keen to participate on a traditional basis.”

Dowlen added that reinsurers are rethinking how best to support clients in today’s risk environment.

“Reinsurers are starting to look at how they can be more relevant to clients in Europe, how they can be meaningful to them and address the additional concerns they’re facing,” Dowlen concluded.

Read all of our interviews with ILS market and reinsurance sector professionals here.

ILS appetite grows for EU aggregate cat cover as cedants seek earnings protection: Gallagher Re’s Dowlen was published by: www.Artemis.bm
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Rather than reinventing the wheel, ILS must refine and scale: Apex’s D’Cunha

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Investor appetite for insurance-linked securities (ILS) continues to grow, but the asset class must evolve structurally to sustain momentum, address friction points like trapped capital, and engage a broader investor base, according to Rudy D’Cunha, Global Head of Insurance Services at Apex Group.

Rudy D'Cunha Apex GroupDuring a recent interview with Artemis, D’Cunha shared his perspective on how the market is maturing, where innovation is focused, and what it will take to unlock the next wave of capital.

“What ILS has done extremely well is the marriage of capital markets and insurance risk,” says D’Cunha, who has observed a healthy uptick in ILS growth and investor diversification over the past three years.

“The ILS market has seen healthy growth over the past three years, gaining more investor attention and capital inflows. There’s a mix of traditional investors who remain committed and optimistic, and new entrants, particularly family offices, attracted by the diversification benefits. Despite earlier volatility, the market has proven resilient, offering solid returns and presenting an attractive alternative in today’s uncertain macroeconomic climate.”

As capital flows broaden, so too does the appetite for more customised investment vehicles.

According to D’Cunha, structures like sidecars, quota shares, and managed accounts are gaining relevance as institutional investors seek greater control and alignment with their risk preferences.

“Yes, all of these structures continue to be relevant and are actively used. Traditional structures like funds and sidecars remain the standard and reliable mechanisms for capital deployment. However, managed accounts are seeing increased interest, particularly from larger investors seeking bespoke portfolios and more control over exposures.

“There is also a growing curiosity around digital assets as a potential capital source, though this remains largely untapped. While digital asset-backed structures haven’t yet gained meaningful traction in ILS, many industry participants are monitoring developments closely, recognizing that as use cases mature, this could represent a significant pool of alternative capital.”

D’Cunha also notes that the expansion of the asset class beyond property catastrophe risk is a key trend, with areas such as casualty, cyber, life, MGAs, parametric covers, and Lloyd’s syndicates gaining traction

“In addition to new sources of capital there are additional exposure segments being added to the existing Property Cat offerings namely Casualty, Cyber, MGAs, Life, Parametric, Lloyds Syndicates etc. all gaining substantial interest in recent years,” he explained.

“Innovation in capital structures is currently focused on extending and adapting these established models to meet the needs of a broader and more diverse investor base. Rather than reinventing the wheel, the market is working to refine and scale tried-and-tested formats to improve access, customization, and efficiency,” D’Cunha continued.

“Ultimately, the flexibility of these structures, particularly managed accounts, offers investors the ability to allocate capital in a way that aligns more closely with their individual risk appetite and strategic objectives, which is critical in today’s market environment.”

When asked what structural changes are needed to help make ILS capital more efficient, particularly in regards to trapped capital, D’Cunha stated: “Trapped capital remains a persistent issue in ILS. While some solutions are being explored like multi year contracts, accelerated contract commutations, fronting, etc. completely eliminating trapped capital is unlikely due to the fundamental nature of reinsurance contracts.

“The key is to better manage the timing of loss evaluations and payouts without altering core contract mechanics.”

To unlock more consistent capital inflows, D’Cunha stresses the need for education, transparency, and risk management.

“Greater awareness and education are essential, especially among younger investors as well as intermediaries who might overlook ILS in favour of flashier assets like crypto. Diversification should be a key component for portfolios and ILS as an asset class can offer just that. Industry events help, but more proactive outreach and transparency are needed,” D’Cunha said.

“As a service provider, at Apex we continue to significantly invest in newer technology to provide our clients and their clients greater transparency and efficiency. Risk management is also crucial; protecting downside risk, even at the expense of some returns, will build trust and encourage long-term investment,” he further explained.

New tools like blockchain-based smart contracts and tokenization may also play a role.

“Using blockchain for smart contracts, thoughtful ESG and impact investing alignment, and allowing for fractional ownership via tokenization can also be a step in the right direction,” D’Cunha added.

Lastly, D’Cunha explains how he see’s ILS managers adapting to a more complex landscape through data, infrastructure, and collaboration, especially in global ILS hubs.

“Managers are becoming more sophisticated, with better data and tools for risk modelling and capital deployment. Larger, established managers benefit from scale and infrastructure, while emerging managers need support, often provided by ecosystems like Bermuda, Cayman Islands and Luxembourg.

“Newer managers are trying to compete with larger managers, they have to understand that they’re competing with people who have years of operational history, infrastructure, and technology. One of the things Bermuda has been really good at is supporting a lot of the new managers in that space, having the right professionals, a wide support group.”

“Established managers are often locked into how they’ve been doing things, while new entrants can spot gaps and move quickly. However, it really depends on the stage the manager is at, whether they’re new or traditional, but in both cases, the investment in time, infrastructure, and identifying market gaps is what really makes the difference,” D’Cunha concludes.

Read all of our interviews with ILS market and reinsurance sector professionals here.

Rather than reinventing the wheel, ILS must refine and scale: Apex’s D’Cunha was published by: www.Artemis.bm
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