Insurance-linked securities (ILS) funds, which are predominantly used to backstop mainstream insurers, are funnelling money into the primary coverage market, helping to suppress earnings for traditional carriers. While the trend has mostly affected the US property catastrophe reinsurance market, the funds were moving further along the value chain to the primary commercial property insurance space, according to a study by ratings agency Standard & Poor's (S&P). Commercial property insurance rates have been seeing gradual pressure in recent years, but as the flow of capital markets money backing that sector increases we could see that accelerate. The report said that ILS fund managers have been "aggressively buying up properties in distressed markets" and had also bought more than $900 million worth of residential mortgage backed securities, or RMBSs,
Insurance-linked securities (ILS) funds, which are predominantly used to backstop mainstream insurers, are funnelling money into the primary coverage market, helping to suppress earnings for traditional carriers. While the trend has mostly affected the US property catastrophe reinsurance market, the funds were moving further along the value chain to the primary commercial property insurance space, according to a study by ratings agency Standard & Poor's (S&P). The report said that ILS fund managers have been "aggressively buying up properties in distressed markets" and had also bought more than $900 million worth of residential mortgage backed securities, or RMBSs,