ILS market growth should not be at the expense of discipline, S&P warns
Thursday, 08 20 2015, Category: Insurance and Reinsurance, Country: World
Continued and future growth of the insurance-linked securities (ILS), catastrophe bond and alternative reinsurance capital market should not come at the expense of discipline, warns rating agency Standard & Poor’s.
The rating agency said in a new report that it expects the alternative capital and ILS market will continue to grow, as third-party investors increasingly look to the returns of the reinsurance market as a valued asset class.
Even if not growing at the rapid rate seen in recent years, S&P says that it expects that given the ease and efficiency with which capital can flow into the reinsurance market now and while major catastrophe losses remain absent from the market, it expects ILS market growth will continue.
The alternative capital market will “continue to innovate and push boundaries” in insurance and reinsurance, the rating agency explains. This innovation and breaking down of boundaries will translate into the catastrophe bond market, S&P expects, something the rating agency welcomes but warns should not come at the cost of looser discipline.
“As we welcome this innovation, we continue to caution that any growth should not come at the expense of looser underwriting discipline and less due diligence,” Standard & Poor’s credit analyst Maren Josefs said.