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Insurance-linked securities market hits $75 billion in 2016

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Property/casualty insurance-linked securities capital grew in 2016 as the market continued to diversify into new products and perils, Willis Towers Watson P.L.C. said Thursday.

The latest ILS Market Update from Willis Capital Markets & Advisory, the broker’s investment banking unit, found that total ILS assets under management in 2016 grew to $75 billion from $70 billion the previous year. 

The ILS market picked up in the fourth quarter of 2016 with $2 billion of P/C catastrophe bond capacity issued through five transactions, compared with $1.4 billion issued in the same period of 2015.

While all fourth-quarter issuances came from repeat sponsors, Willis said, they did bring diversified perils to investors. 

Assicurazioni Generali S.p.A’s Horse Capital I, covering auto third-party liability risk in seven European countries, was the first bond since 2007 to do so, while XL Bermuda’s Galilei I Re was the first bond to cover Australian tropical cyclone and Australian earthquake since 2013, according to the report.

“(D)iversification by peril became increasingly important to investors, as did different approaches to liquidity and leverage, dependent on each investor’s appetite for ILS risk,” Bill Dubinsky, WCMA’s New York-based head of ILS, said in a statement.

On the market outlook for 2017, Mr. Dubinsky said, “our 2017 expectation is that assets under management will continue to grow at roughly the same pace as in 2016.” 

“Leverage and diversity will also increase, led by a greater level of sophistication amongst the established investor base,” he continued. “At the same time, newer investors will continue to seek the greater liquidity that the traditional cat bond product offers.”