It has been suggested by Lane Financial LLC that one of the longest hard markets in ILS could be coming to an end if major losses do not occur in 2021. While managers will not want to see rates fall too low, some increased competition in the market as a result of this softening could be a good thing.
There was some evidence that the hard market was reaching a peak last year, as catastrophe bond and ILS rates had been rising persistently, aside from seasonal blips, but then there was a third-quarter 2020 retreat that we reported on last October, which was much more significant than seen in most recent years. This was followed by catastrophe bond and insurance-linked security (ILS) rates-on-line remaining flat through the fourth-quarter of 2020, according to Lane Financial’s synthetic rate-on-line Index. As we documented in our recent report on first-quarter 2021 catastrophe bond issuance, falling prices of new issuance was a sign of strong demand from investors and a softening rate environment.