Alternative reinsurance capital set to hit record in 2018: Hannover Re

Capital provided through insurance-linked securities will likely hit a record high in 2018 and close in on $100 billion, Hannover Re SE said Wednesday.

About two-thirds of the total will be through collateralized reinsurance, which are private contracts between capital markets investors and cedents that are backed by funds held in trust, the Hanover, Germany-based reinsurer said in a statement.

According to various estimates, ILS issuance hit about $90 billion last year, making up about 20% of total reinsurance market capital.

Catastrophe bonds, which led the development of the ILS sector, have taken a less prominent role in the past several years with about $10 billion in issuance last year.

Hannover Re has completed five catastrophe bond transactions this year, the reinsurer said. The latest, in September, provided $125 million in coverage for San Diego-based utility Sempra Energy to cover liabilities resulting from wildfires caused by its facilities.