Negative returns the order of the day for 2017: Lane Financial
The insurance-linked securities (ILS) and reinsurance market are set to be characterised by losses in 2017, with specialist consultancy Lane Financial LLC saying that “negative returns will be the order of the day in 2017,” but that the impact to the market will be muted by excess capacity.
Lane Financial takes a look at the impacts of recent hurricanes and earthquakes on the catastrophe bond market in its latest quarterly report and discusses the broader impacts to reinsurance and ILS investments.
Whatever the negative returns though, the reinsurance and ILS sector is well positioned to deal with the expected $100 billion plus of losses that are set to be paid, meaning that the impacts to how the market functions will be constrained by its ability to absorb them.
Lane Financial note that; “The loss will not be so consequential as it would if the industry were capital restrained.”
The consultancy said that they do expect to see similar reactions in the reinsurance industry as were witnessed post Katrina, with the potential for new start-ups, company failures and also increased premium availability.
However they explain that this time around, largely due to the excess capacity in the space (also perhaps the greater influence of ILS, we’d also suggest), the consequences for the market will be “much more muted.”
Lane Financial estimates a catastrophe loss of -5.4% for the quarter, using secondary cat bond mark data, with September down -6.51% but this was offset by small gains in July and August, the firm explained....MUCH MORE