NEW VESTTOO RESEARCH: Low Volatility Asset Class Projected to Jump to $120 Billion over next Three Years
New report estimates 11 percent growth in non-catastrophe insurance linked securities driven by demand for uncorrelated, low-volatility assets and lack of capacity in traditional reinsurance industry
The growing non-CAT ILS market includes insurance lines based on Property & Casualty (P&C), Specialty and Life - in short, any form of insurance liability distinct from natural catastrophe risk. These lines of business are characterized by large datasets of high frequency and low volatility claims patterns, enabling higher-confidence risk modelling and expected returns.
"This new research confirms what we're seeing on the ground in markets across the globe: institutional investors are increasingly seeking out low-volatility, market uncorrelated asset classes. Non-catastrophe insurance linked securities provide exactly that," said
The projected jump in interest in non-CAT ILS comes at one of the most-challenging renewal periods for the reinsurance industry in decades. In fact, year-on-year pricing of
KEY FINDINGS
- Non-catastrophe insurance-linked securities market is projected to jump to an estimated
$120 billion by 2025, an 11% increase over 2023. - Cedents are welcoming alternative capital, with the industry experiencing the biggest year-on-year pricing increase for renewals since Hurricane Andrew over thirty years ago.
- Q1 2023 saw one of the most-challenging renewal periods for the reinsurance industry in decades, with reduced capacity and higher prices.
- Non-CAT ILS continues to demonstrate lower volatility and attractive risk-adjusted returns, with greater Sharpe ratios than CAT-bonds, high-yield bonds and equities while having in-line projected returns.
This publication is the first in what will be a regular series of quarterly reports. The publication shines a spotlight on Vesttoo's market analysis, which in Q1 tackled the question of how inflation affected ILS.
For more information, please download the report here.
About Vesttoo
Vesttoo connects the insurance industry with the capital markets by combining AI-powered technology with expertise in data science, insurance, and finance. We provide insurers with the capacity they need and investors with opportunities to diversify with uncorrelated, low volatility insurance-linked assets. Among the company's partners are well-established global insurers, financial institutions, and large multinational brokers. Securities products and services in
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