Insurance Linked Securities: Trends, Challenges and New Market Opportunities

Due to their relatively high yields and low return correlations with traditional asset classes, insurance-linked securities (ILS) have repeatedly been described as an appealing investment opportunity (e.g. Cummins and Weiss, 2009; Braun et al., 2013). Yet, the investor base for this kind of asset is largely dominated by few specialized investment managers. The aim of this paper is to analyze advantages and disadvantages, the current market development and the decision-making processes that drive the demand for this aspiring asset class. To reach this aim we first collect the existing knowledge on ILS products and markets, then present results of a new international survey among ILS investors and finally, based on the results of the first and second step derive implications for the future development of ILS.