For insurance and reinsurance companies, the expansion of insurance-linked securities and the catastrophe bond market are viewed as credit positive by KBRA, with the rating agency explaining that the additional capacity the ILS market offers is increasingly important, supporting capital flexibility and protecting sector balance-sheets.
Increasing volumes of catastrophe bond issuance are creating greater risk transfer optionality for the traditional insurance and reinsurance market, KBRA says, highlighting the “additional avenues to access capacity, diversify counterparties, and reduce dependence on traditional reinsurance cycles.”
KBRA views cat bonds as a complementary risk transfer tool, but also one that is becoming increasingly important to re/insurers capital management strategies.
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