status: draft
Key participants
Understanding who operates in the ILS market helps you navigate relationships, find deal flow, and evaluate counterparties. The market is relatively concentrated, with established players across each function.
Sponsors are insurance and reinsurance companies that issue cat bonds or purchase collateralized reinsurance to transfer risk.
| Sponsor | Characteristics |
|---|
| Swiss Re | Largest ILS sponsor historically, regular multi-tranche programs |
| Munich Re | Major sponsor, also active as ILS investor |
| Hannover Re | Consistent issuer, various perils |
| Chubb | Large P&C, diversified programs |
| AIG | Major sponsor, various perils |
| Travelers | Regular issuer |
| USAA | Large personal lines, repeat issuer |
| State Farm | Major auto/home, selective ILS use |
| Allstate | Personal lines, diversified |
| Tokio Marine | Japan exposure, multi-peril |
| Sompo | Japan-focused programs |
| Sponsor | Coverage |
|---|
| Florida Citizens | Largest cat bond program, Florida hurricane |
| California Earthquake Authority (CEA) | California earthquake |
| Texas Windstorm Insurance Association (TWIA) | Texas coastal wind |
| Louisiana Citizens | Louisiana hurricane |
| World Bank (IBRD) | Sovereign disaster risk for developing nations |
| FEMA / NFIP | US flood insurance |
| Factor | Implication |
|---|
| Different governance | Political influences on underwriting |
| Reporting requirements | May be more transparent or more opaque |
| Implicit state backing | Different credit profile |
| Larger deal sizes | Often $300M+ transactions |
| Concentration risk | Geographic focus by definition |
| Regulatory environment | Subject to state insurance regulation |
| Characteristic | Why It Matters |
|---|
| AM Best A rating or better | Financial stability |
| Consistent issuance history | Established track record |
| Transparent loss reporting | Especially for indemnity triggers |
| Fair dealing reputation | No dispute history |
| Quality exposure data | Accurate modeling input |
| Reasonable pricing expectations | Understands market |
First-time issuers typically pay 50-100 bps premium (new sponsor spread) until they establish track record.
Investors
Dedicated ILS funds
These firms focus primarily or exclusively on ILS:
| Fund | Characteristics |
|---|
| Fermat Capital | Large dedicated ILS fund, diversified |
| Twelve Capital | Swiss-based, significant AUM |
| Nephila (Markel) | Pioneer in ILS, acquired by Markel |
| Credit Suisse ILS (now UBS) | Bank-affiliated, large program |
| LGT ILS Partners | Swiss private bank platform |
| Elementum Advisors | Dedicated ILS specialist |
| Securis Investment Partners | UK-based, diversified |
| Pillar Capital | Dedicated reinsurance |
| Leadenhall Capital | UK-based specialist |
| Aeolus Capital | Bermuda-based, diversified |
Pension funds and endowments
| Type | Characteristics |
|---|
| US public pensions | CalPERS, CalSTRS, others allocate to ILS |
| UK pension schemes | Growing allocation, long duration match |
| European pensions | Significant allocations in Netherlands, Switzerland |
| University endowments | Diversification allocation |
| Sovereign wealth funds | Opportunistic participation |
Institutional investors typically access ILS through dedicated funds or fund-of-funds rather than direct investment.
Hedge funds
| Type | Approach |
|---|
| Multi-strategy | ILS as one sleeve of diversified portfolio |
| Dedicated reinsurance | Focus on ILS and related |
| Opportunistic | Enter post-event at distressed prices |
Reinsurers as investors
Traditional reinsurers invest in cat bonds for diversification:
- Provides market liquidity
- Diversifies their risk exposure
- May create conflicts when reinsurer is both cedent and investor
Investor capital by type (estimated)
| Investor Type | % of ILS Capital |
|---|
| Dedicated ILS funds | 55-60% |
| Pension funds (direct and via funds) | 20-25% |
| Hedge funds | 10-15% |
| Reinsurers | 5-10% |
| Other institutional | 5% |
Modeling firms
Major vendors
| Firm | Strengths | Ownership |
|---|
| AIR Worldwide | US hurricane, earthquake | Verisk |
| RMS | Multi-peril, international | Moody’s |
| CoreLogic | Flood, convective storm | CoreLogic |
AIR has the largest market share, particularly for US perils. RMS is strong internationally and for multi-peril analysis. CoreLogic is growing, especially for historically undermodeled perils.
Boutique modelers
| Firm | Specialization |
|---|
| Karen Clark & Company (KCC) | Independent cat modeling, climate risk |
| Milliman | Mortality and longevity for life ILS |
| Impact Forecasting (Aon) | Proprietary models for Aon deals |
| JLT Re Analytics (Marsh) | Broker-affiliated modeling |
Model independence considerations
Moody’s acquisition of RMS in 2021 creates potential conflicts:
- Moody’s rates cat bonds
- RMS provides modeling for those bonds
- Some investors prefer AIR modeling when Moody’s rates
Sophisticated investors often request both AIR and RMS output for comparison.
Structuring agents
Primary placement agents
| Agent | Characteristics |
|---|
| Swiss Re Capital Markets | Largest market maker, strongest franchise |
| GC Securities (Guy Carpenter) | Strong primary and secondary |
| Aon Securities | Growing presence, broad distribution |
| Gallagher Securities | Selective, growing |
| Howden Tiger | Growing through acquisitions |
These firms:
- Structure transactions
- Coordinate with rating agencies
- Place notes with investors
- Make secondary markets
- Earn 0.25-0.75% structuring fee
Choosing a structuring agent
| Factor | Consideration |
|---|
| Distribution strength | Access to full investor base |
| Secondary market making | Ongoing liquidity support |
| Structuring expertise | Deal complexity handling |
| Relationship | Ongoing coverage and support |
| Fee structure | Competitive but not race to bottom |
| Conflicts | Independence from modeling or rating |
Most sponsors maintain relationships with 2-3 structuring agents and rotate or split deals.
Law firms
| Firm | Characteristics |
|---|
| Sidley Austin | Market leader in ILS, deep expertise |
| Willkie Farr & Gallagher | Strong ILS practice |
| Cadwalader, Wickersham & Taft | Established presence |
| Mayer Brown | Active in cat bonds |
| White & Case | International focus |
| Clifford Chance | UK/European expertise |
Investor counsel
Less common for public 144A deals where investors rely on offering memoranda. For private placements or bespoke structures:
- Dechert
- Seward & Kissel
- K&L Gates
Bermuda/offshore counsel
Most SPVs are Bermuda or Cayman domiciled:
- Conyers Dill & Pearman (Bermuda)
- Appleby (Bermuda, Cayman)
- Walkers (Cayman)
Trustees and administrators
Trustees
| Trustee | Role |
|---|
| Bank of New York Mellon | Collateral trustee, indenture trustee |
| U.S. Bank | Alternative trustee |
| Deutsche Bank Trust | Select transactions |
Trustees hold collateral, enforce contract terms, and manage payment flows.
SPV administrators
| Administrator | Role |
|---|
| Citco | SPV administration, accounting |
| Apex | Administration services |
| SS&C Technologies | Fund administration |
Administrators handle SPV operations, regulatory filings, and investor reporting.
Index and data providers
Loss indices
| Provider | Index | Coverage |
|---|
| Property Claims Services (PCS) | US industry loss | Standard for US ILWs and index triggers |
| PERILS AG | European windstorm | Standard for European index triggers |
| JMA | Japan typhoon | Japan events |
| USGS | Earthquake | Parametric triggers |
| NOAA | Hurricane | Parametric triggers |
Market data
| Provider | Data |
|---|
| Artemis.bm | Deal announcements, news, loss reports |
| Lane Financial | Secondary trading indices, returns |
| Bloomberg | ILS indices (BEILSTRR) |
| Swiss Re | Sigma reports, market statistics |
| Aon | Annual ILS reports |
| Guy Carpenter | Quarterly market reports |
Rating agencies
Cat bond ratings
| Agency | Approach |
|---|
| S&P Global Ratings | Expected loss mapping, structural review |
| Moody’s Investors Service | Similar approach, owns RMS |
| AM Best | Focus on cedent credit impact |
| Fitch Ratings | Selective coverage |
Most cat bonds receive ratings from S&P and/or Moody’s. AM Best focuses more on the cedent side (how ILS affects cedent capital position).
Conflicts and considerations
- Moody’s owns RMS (modeling firm)
- Rating shopping is possible
- Ratings cluster in BB range
- Rating is primarily function of expected loss
Trade associations and industry groups
| Organization | Focus |
|---|
| ILS Bermuda | Industry association, education, advocacy |
| ARIA (Association of Risk and Insurance Analysis) | Professional development |
| Bermuda Business Development Agency | Market promotion |
| Insurance-Linked Securities Association | Standards and practices |
Building relationships
For investors
| Priority | How to Develop |
|---|
| Structuring agents | Express interest, show capital commitment |
| Sponsors | Direct outreach for large allocations |
| Other investors | Industry conferences, co-investment |
| Modeling firms | License or service bureau relationship |
| Priority | How to Develop |
|---|
| Structuring agents | RFP process, relationship building |
| Key investors | Roadshows, ongoing communication |
| Rating agencies | Early engagement on structure |
| Law firms | Select for expertise and relationship |
Key industry events
| Event | Timing | Focus |
|---|
| Monte Carlo Rendez-Vous | September | Reinsurance renewals |
| ILS NYC | Various | US market, investor focused |
| Bermuda Risk Summit | Various | Bermuda market |
| Baden-Baden | October | European reinsurance |
| ILS Asia | Various | Asian market development |
Industry relationships are important in this concentrated market. Repeat participants with good reputations access better deal flow and tighter pricing.
status: draft
For diligence on specific transactions, see ILS diligence guide. For overview of market structure, see Insurance-linked securities.