Amundi US “very constructive” on ILS asset class as 1/1 approaches

With the 1/1 2023 reinsurance renewals fast approaching, investor Amundi US says it is “very constructive” on the insurance-linked securities (ILS) asset class, thanks to the favourable pricing trends.

We understand from sources that Amundi US is making good headway with renewing many of the bilateral quota share reinsurance sidecar style arrangements that it tends to enter into for its interval style mutual fund, the Pioneer ILS Interval Fund.

The type of capacity Amundi US is known for, in the sidecar and quota share space, is particularly important for cedents when the rest of their treaty reinsurance or retrocession arrangements may still be uncertain.

We’re told that quoting for some of these bilateral sidecars has been more forthcoming for cedents, than on the excess-of-loss side of their programs, driving home the important role the capacity can play, especially during a time of market dislocation.

Amundi US sees the current market conditions as “a more attractive point in the market cycle” to deploy capital and continues to look to improve the terms on its transactions, alongside the improvements in pricing.

An investor note by the Amundi US ILS portfolio management team seen by Artemis states that, “As price increases, the scope of coverage offered can be reduced through more restrictive contractual wording (i.e. better defined exclusions), thus possibly leading to improved underwriting margins.”

Adding, “Amundi US is attempting to take advantage of our stable capacity to benefit from these market dislocations.”

Sources tell us that the type of capacity put out by Amundi US and also Stone Ridge Asset Management, in the private and bilateral quota shares they pair underwrite and invest in, could play a vital role at this renewals.

Amundi US notes that this year’s renewals seem particularly “protracted”, as the supply-demand imbalance affects the ability of the market to clear prices and finalise trades.

In fact, the asset manager believes that the reinsurance and ILS industry are unable to keep up with demand at this time, given the challenges in bringing new capital into the sector and the reduction in outright capacity with an appetite for catastrophe risks.

All of which makes for ideal conditions for deploying capital if you have it and Amundi US continues to believe that the market is now favouring those with relatively stable capacity to deploy, including itself.

The Amundi US ILS team’s constructive view on the ILS asset class extends beyond the January 2023 renewals as well, with the asset manager saying most in the market and observing it expect an acceleration in hard market conditions will continue.

Meaning positive opportunities are likely to be seen for capital deployment at renewals beyond January, with April, June and July 2023 all likely to see better market conditions for ILS capital and likely higher pricing than they did this year.

As we were first to report earlier this week, Amundi Asset Management US, Inc. (Amundi US) is also in the process of marketing and launching its first pure catastrophe bond mutual fund strategy.