In a recent report, Moody’s Ratings highlights how the economics of catastrophe bonds and insurance-linked securities change over time, driven by the softening global reinsurance market cycle. The end-result is more risk being assumed for less return, but as long as ILS manager’s maintain discipline, there is no cause for concern at this stage.
Reinsurance has always been a cyclical industry, with peaks and troughs as market and capital dynamics adjust to loss activity, risk appetite or understanding and external factors like the global capital markets.
For at least two decades now, the industry has often discussed the potential for this cyclicality to reduce over-time, or disappear completely.
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