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Reinsurers are pulling back cat reinsurance coverage, but cat bonds & ILS instruments may help

Following multiple years of large catastrophe losses, reinsurers are raising prices and pulling back cat reinsurance coverage. This puts the cat bond market in a favourable position to provide the large amount of risk capital needed to cover the most damaging global catastrophes, according to a report from DBRS Morningstar.

It expects a moderate decrease in cat bond issuances in H1 2023 following the rapid rise in interest rates.

However, sustained demand for cat risk transfer should support a return to the trend of strong volume growth observed in the last 20 years.

While P&C insurers have generally performed well in recent years, catastrophe experience has been challenging for the industry as 2022 marked the second consecutive year where global catastrophe insured losses exceeded $100 bn.


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