Commentary on Shifting Profiles

June 01, 2010

By: Morton N. Lane, President

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Quarterly Market Performance Report – Q2 2010

June 01, 2010

By: Morton N. Lane, President; Roger G. Beckwith, Vice President

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Annual Review for the Four Quarters, Q2 2009 to Q1 2010

April 16, 2010

By: Morton N. Lane, President; Roger Beckwith, Vice President

It is our practice to release updated Tables and Graphics demonstrating trends and activity in the ILS markets on an off-cycle, Q2 to Q1, basis. This release contains those updated Tables and Graphics.

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Looking Forward; Looking Back

January 22, 2010

By: Morton N. Lane, President

Our purpose in this paper is to conduct an in-depth examination of the historical record of ILS investing and to reflect on the implications for future risk and returns.

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It’s a Still Wind that Blows Everyone Some Good

October 30, 2009

By: Morton N. Lane, President

One month to the official end of the hurricane season (November 30) shows the distinct possibility of a “loss-free” catastrophe year. It’s not over ‘til it’s over, or the fat lady sings, but so far so good. US wind losses are the lowest since 2006. And, as our title reversing of the old English proverb indicates, a quiet season has benefited a lot of people.

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Quarterly Market Performance Report – Q4 2009

December 31, 2009

By: Morton N. Lane, President; Roger G. Beckwith, Vice President

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Quarterly Market Performance Report – Q3 2009

September 30, 2009

By: Morton N. Lane, President; Roger G. Beckwith, Vice President

The preceding figures and tables update return figures for Q3 2009. As is evident, the passage of a substantially loss-free US wind season, together with easing conditions in the credit markets (and recovery of collateral values as a result) has combined to make the third quarter one of exceptional gains. It is the highest returning quarter ever. It exceeds the previous high in returns for Q1 2007. For the market as a whole the exact numbers are recorded in the tables. For investors who confine their cat investment portfolio to sub-investment grade ILS the numbers are as follows: the returns for Q3 would be 7.08% and the total return index level would be at 188.44, a Compound Annual Growth Rate equivalent ,since 2002, of 8.52%.

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Quarterly Market Performance Report – Q2 2009

June 30, 2009

By: Morton N. Lane, President; Roger G. Beckwith, Vice President

Reinsuring against catastrophic loss requires capital; lots of it. When capital disappears it must be replaced – if the market is to provide prior levels of protection. The traditional ways to replace capital are a) raise new equity, and b) increase premiums on new business. The latter phenomenon is a so called “hard market”, of which the 2005-6 market, following hurricane Katrina, is the text book example. Prior hard markets occurred following the World Trade Center loss in 2001 and following hurricane Andrew and the Northridge earthquake in 1992-94. Each of these three hard markets also saw capital raising as well as higher premiums. This was manifest by debt and equity issues by existing companies as well as the entry of new reinsurance company participants. Those new entrants formed the so-called classes of 1993-4, 2001-2, 2005-6.

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Annual 2009 ILS Review and Q1 2009 Quarterly Performance Review

April, 2009

By: Morton N. Lane, President; Roger G. Beckwith, Vice President

“Change we can believe in” was a very successful political campaign for 2008. Let’s hope it is just as successful for the ILS market in 2009. The “change” necessary for the ILS market involves the security of funds on deposit at Special Purpose Vehicles. The “belt and suspenders” protection the market thought it had, prior to the Lehman default, was found wanting. For four now infamous, ILS securities the belt (the Total Return Swap, TRS) broke with that default of Lehman but the suspenders (the collateral behind the swap) were then found to be of inquality. The old arrangement did not provide security to either cedants or investors. Pre-Lehman TRS mechanisms need “change” and the market is now preoccupied with deciding which change to believe in.

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January, 2009

By: Morton N. Lane, President

“Alpha” is the holy grail of the conservative investor. Alpha expresses that part of an investment’s return that is not related to general market returns. Thus an investment that does not fall when the Dow falls (and vice versa) is said to have high alpha. It would be a valuable diversifying asset to reduce portfolio volatility. Regrettably, such investments (or asset classes) are hard to find. Insurance Linked Securities (ILS) are, however, thought to be one such class. This chapter surveys the ILS market, its history and the claim that it provides genuine alpha.

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