ILS Market Deepens as BSX Hits $70.5B and Fermat Targets New Zealand
By The Reinsurance Daily Editorial ·
ILS Market Deepens as BSX Hits $70.5B and Fermat Targets New Zealand
Fermat Capital Targets New Zealand with Cat Bond PIE Fund
Fermat Capital Management, an ILS manager with over $11 billion in assets, is expanding its capital sourcing by launching a new cat bond fund for New Zealand-based investors. The fund is structured as a Portfolio Investment Entity (PIE), a vehicle designed for tax efficiency within New Zealand. This move seeks to tap into a new investor base, diversifying Fermat's sources of capital. The new fund will invest in Fermat’s flagship strategy, which reported a 28% return in 2023. This follows a period of strong performance for the ILS sector, with the Swiss Re Global Cat Bond Index returning nearly 20% last year.
Bermuda Stock Exchange Solidifies Dominance in ILS Listings
The Bermuda Stock Exchange (BSX) has reinforced its position as the primary listing venue for Insurance-Linked Securities (ILS), with total listed volume reaching a new high of $70.5 billion. This represents a significant portion of the global outstanding cat bond market. The BSX now holds approximately 95.4% of the global market share for listed ILS and cat bonds, demonstrating its entrenched role in the market’s infrastructure. The total number of listed securities on the exchange has also grown, indicating continued product issuance and investor demand for transparent, exchange-listed instruments.
The Bermuda Stock Exchange reports that total cat bond and ILS listings increased from $68.5 billion to $70.5 billion, with new issuance in the first half of the year reaching $16.5 billion.
AIG and Parametrix Launch Parametric Cloud Outage Cover
AIG has partnered with Parametrix to launch a parametric insurance product covering losses from cloud downtime. This policy is triggered by outages from third-party IT and supply chain providers, including major cloud services like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud. With global public cloud services spending projected to reach $129 billion, the financial impact of outages is a material, unhedged risk for many corporations. The policy provides pre-agreed payments based on the duration of a qualified outage, bypassing complex business interruption claims adjustments. AIG reports that 35% of organizations have experienced a significant cloud supply chain disruption.
Kansas Court Sentences Individual for Insurance Fraud
A Salina, Kansas resident, Brenda K. Halfhide, was sentenced to 12 months of probation after pleading guilty to one felony count of insurance fraud. The case involved submitting a fraudulent insurance claim to American Family Insurance for hail damage to a vehicle. The attempted fraud was valued at over $500. As part of the sentence, Halfhide must pay $500 in restitution and is prohibited from working in the insurance industry or for any fiduciary business during her probation. The Kansas Insurance Department investigated the case.
Sunstar Continues M&A with Acquisition of RJR Faribo
Sunstar Insurance Group has acquired RJR Faribo Insurance Agency, a Minnesota-based independent agency. This marks Sunstar’s tenth acquisition of the year and expands its presence in the Midwest. RJR Faribo provides a range of personal, commercial, farm, life, and health insurance products. The financial terms of the deal were not disclosed, but Sunstar, which now has $103M in annual revenue, continues its strategy of acquiring local and regional agencies to build scale. The acquisition will integrate RJR Faribo’s team, including agency principals Alex and Andy Kretzschmar, into the Sunstar organization.
Key Takeaways
- The simultaneous growth of listing infrastructure at the BSX ($70.5B total listings) and capital-raising initiatives in new jurisdictions like Fermat's New Zealand fund demonstrates a maturing ILS market focused on both scalability and investor base diversification.
- The AIG/Parametrix partnership signals an opportunity for reinsurers to support parametric products for non-cat perils. Underwriters should evaluate capacity allocation for products with clear, objective triggers like cloud downtime, where basis risk is manageable and claims adjustment is minimal.
- ILS managers seeking to expand their investor base should note Fermat's use of a tax-advantaged Portfolio Investment Entity (PIE) structure for its New Zealand fund. Offering jurisdictional-specific wrappers can unlock capital pools that are otherwise inaccessible.
- The proliferation of parametric cloud outage policies, while innovative, creates a new vector for systemic risk. A single widespread outage at a major provider like AWS could trigger correlated losses across numerous carriers simultaneously, a peril with aggregation potential that requires careful monitoring and modeling.
Sources
Fermat Capital Management launches Cat Bond PIE Fund for New Zealand investors — artemis.bm
Bermuda Stock Exchange market share grows, with now $70.5bn cat bond and ILS listings — artemis.bm
AIG launches parametric cloud outage insurance working with Parametrix — artemis.bm
Kansas Woman Sentenced to Probation for Insurance Fraud — insurancejournal.com
Sunstar Acquires Minnesota’s RJR Faribo Insurance Agency — insurancejournal.com