Over the last two years, insurers have been dealing with the most disrupted property reinsurance market since 1992.
(Editor's Note: One of the co-authors, Resolute Global, announced the launch of "Footprint," an MLT, which Resolute Global created in collaboration with global reinsurance broker Gallagher Re and catastrophe modeling firm Karen Clark & Co., a firm led by the second co-author, in April 2023.)
As was the case in the post-Andrew era, reinsurers have abruptly hiked coverage costs, constrained capacity and limited cover by requiring higher retentions. Major reinsurers are pulling out of markets while insurers are pulling back from states like Florida and California.
Executive Summary Traditional reinsurance capacity is shrinking relative to increasing risk, and a new risk transfer product—the modeled loss transaction—is providing additional reinsurance protection to insurers. This article explains how these transactions work and the benefits to reinsurers and ILS investors as well as to ceding insurers.
(Editor’s Note: One of the co-authors, Resolute Global, announced the launch of “Footprint,” an MLT, which Resolute Global created in collaboration with global reinsurance broker Gallagher Re and catastrophe modeling firm Karen Clark & Co., a firm led by the second co-author, in April 2023.)