Alternative capital in the form of insurance-linked securities is here to stay, and its response to a record-setting year for natural-catastrophe losses has “fundamentally changed marketplace dynamics,” according to a property market update from Willis Towers Watson.
The broker said catastrophe-exposed properties with recent losses are facing rate hikes of 20-25 percent, and similar programs without losses are facing increases of 10-20 percent. Other non-catastrophe-exposed property programs can expect flat renewals or a slight increase of 5 percent.
However, the abundance of conventional and alternative capital rules the day. As a result, Willis Towers Watson said it does not expect current conditions to last more than a few quarters.
“We see no end in sight to ILS growth as a long-term trend,” Willis Towers Watson said in the report. While making a point to say the insurance industry will not be replaced by ILS, the broker conceded that “the industry has changed, and the changes are permanent.”