International

ILS market defies economic turmoil

Insurance-linked securities (ILS) issuers must take steps to broaden their client base if the market is to reach its full growth potential, according to a new report by the World Economic Forum (WEF). In particular the report, which is co-sponsored by Zurich Financial Services and Swiss Re, says ILS issuers need to improve data transparency, and issue more information on the risks being transferred, if they are to attract direct interest from institutional investors and tap into new investor groups. The ILS market has recorded growth of between 40% and 50% each year since 1997 and last year alone the notional value of outstanding ILS increased from US$26bn in 2006 to US$39bn at the end of 2007. According to the WEF the ILS market for securitised general insurance liabilities has “held up well in the current difficult environment” and the risk diversification opportunities offered by cat bonds “meets strong investor appetite” in the current financial climate. Dan Ozizmir, Swiss Re’s Head of Insurance-Linked Capital Markets, said the research had revealed positive views about the development of the ILS market to date but added that several issues, including data transparency, “need to be addressed to ensure that its development can continue at an even greater velocity”.