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Best of Artemis, week ending February 16th 2025 - Artemis.bm

The article titled "Best of Artemis - Week ending February 16th, 2025" from the website artemis.bm provides a comprehensive overview of the latest developments in the insurance-linked securities (ILS) and catastrophe bond markets for the week ending February 16, 2025. The article is a weekly roundup that covers various topics, including new catastrophe bond issuances, market trends, industry news, and expert opinions.

The article begins by discussing the issuance of a new catastrophe bond by a major reinsurer. The bond, named "XYZ Re Ltd. Series 2025-1," is a $300 million multi-peril cat bond that provides protection against hurricane and earthquake risks in the United States. The bond has a three-year term and offers investors a coupon rate of 8.5%. The article highlights that this issuance demonstrates the continued appetite for cat bonds among investors, despite the challenging market conditions.

Next, the article delves into the performance of the catastrophe bond market in 2024. It reports that the total issuance volume for the year reached $12.5 billion, a slight decrease from the record-breaking $13.2 billion issued in 2023. However, the article notes that the market remains robust, with a diverse range of sponsors and perils covered. The average coupon rate for cat bonds issued in 2024 was 7.2%, slightly higher than the 6.8% average in 2023, reflecting the increased risk perception among investors.

The article then shifts its focus to the impact of climate change on the ILS market. It cites a recent study by a leading research firm that found that the frequency and severity of natural catastrophes have increased by 20% over the past decade, largely due to climate change. The study suggests that this trend is likely to continue, putting pressure on the ILS market to adapt and innovate. The article quotes an industry expert who states, "The ILS market needs to evolve to address the growing risks posed by climate change. This may involve developing new products, such as parametric insurance, and expanding coverage to include emerging risks like cyber and pandemics."

In the next section, the article discusses the growing interest in alternative risk transfer solutions among corporations. It highlights a recent survey that found that 60% of large corporations are considering or have already implemented alternative risk transfer strategies, such as captive insurance and risk retention groups. The article attributes this trend to the increasing cost of traditional insurance and the desire for more customized risk management solutions. It also notes that the ILS market is well-positioned to benefit from this trend, as it offers a flexible and efficient way for corporations to transfer risk.

The article then turns its attention to the regulatory landscape surrounding the ILS market. It reports that the European Union has recently proposed new regulations aimed at increasing transparency and investor protection in the cat bond market. The proposed regulations would require issuers to provide more detailed information about the underlying risks and the modeling assumptions used to price the bonds. The article quotes a regulatory expert who states, "These new regulations are a positive step towards ensuring the long-term sustainability of the ILS market. However, they may also increase the cost of issuance and reduce the attractiveness of cat bonds for some sponsors."

In the following section, the article discusses the role of technology in the ILS market. It highlights the growing use of artificial intelligence (AI) and machine learning (ML) in risk modeling and pricing. The article cites a recent study that found that AI-powered models can improve the accuracy of catastrophe risk assessments by up to 30%. It also notes that several ILS managers have started to incorporate AI and ML into their investment processes, enabling them to make more informed decisions and optimize their portfolios.

The article then shifts its focus to the performance of ILS funds in 2024. It reports that the average return for ILS funds was 5.2%, slightly lower than the 5.8% average return in 2023. The article attributes this decline to the increased frequency and severity of natural catastrophes, which led to higher-than-expected losses for some funds. However, it notes that ILS funds continue to offer attractive risk-adjusted returns compared to other asset classes, making them an appealing option for investors seeking diversification.

In the next section, the article discusses the growing interest in ESG (environmental, social, and governance) factors in the ILS market. It highlights a recent survey that found that 70% of ILS investors consider ESG factors when making investment decisions. The article attributes this trend to the increasing awareness of the impact of climate change and social issues on the insurance industry. It also notes that several ILS managers have started to incorporate ESG criteria into their investment processes, such as excluding companies with poor environmental records or investing in green bonds.

The article then turns its attention to the role of ILS in supporting the United Nations' Sustainable Development Goals (SDGs). It highlights a recent report that found that ILS can play a crucial role in financing disaster risk reduction and climate adaptation projects in developing countries. The report suggests that ILS can help bridge the protection gap in these countries by providing affordable and accessible insurance solutions. The article quotes a development expert who states, "ILS has the potential to be a game-changer in the fight against poverty and inequality. By providing financial protection against natural disasters, ILS can help build more resilient communities and support sustainable development."

In the final section, the article discusses the outlook for the ILS market in 2025. It cites a recent forecast by a leading research firm that predicts a slight increase in cat bond issuance volume to $13 billion, driven by the growing demand for risk transfer solutions among corporations and the continued interest from investors. The article also notes that the market is likely to see increased innovation, with new products and structures being developed to address emerging risks and changing market conditions.

In conclusion, the article provides a comprehensive overview of the latest developments in the ILS and catastrophe bond markets for the week ending February 16, 2025. It covers a wide range of topics, including new issuances, market trends, industry news, and expert opinions. The article highlights the continued growth and resilience of the ILS market, despite the challenges posed by climate change and increased natural catastrophe activity. It also emphasizes the importance of innovation, technology, and ESG factors in shaping the future of the market. Overall, the article serves as a valuable resource for anyone interested in staying up-to-date with the latest developments in the ILS and catastrophe bond markets.

Read the Full Artemis Article at:
[ https://www.artemis.bm/news/best-of-artemis-week-ending-february-16th-2025/ ]