Insurance Linked Securities

Whether from primary or secondary perils, losses from natural disasters have now exceeded cat budgets for some years in a row. The frequency and severity of events have exceeded our expectations, usually based on internal and vendor cat models. Efforts have been made using multiple granular economic and risk data to better understand what and where the insured values are (including density, inflation and business interruption), but we are forced to recognize the changing nature of events we face.

The continued growth of the cyber insurance market, increasing premiums and the potential for risk diversification is causing fund managers to consider the prospect of cyber risk as an asset class.

Though underwriting gains are likely to offset some losses, says AM Best

New investors are now looking at high frequency, low severity life and P&C insurance assets  to earn additional spread on their existing assets.