UBS Asset Management: Collateralized re remains attractive despite softening

By David Bull

June 13 - (The Insurer) - Although pricing for collateralized reinsurance has fallen from the hard market highs of 2023 and early 2024, it is still “quite attractive” in a historical context, said UBS Asset Management.

In an update on private markets investments published just ahead of the mid-year renewals, the firm said that pricing was expected to modestly soften, with a “notable amount” of dispersion as more remote contracts experienced more material price reductions.

Lower attaching and recently loss-affected contracts were less likely to experience significant price reductions, with some price increase in select cases.

UBS Asset Management said that January’s California wildfires are likely to put a floor under pricing for many contracts, but would not likely have a major impact on pricing.

“Cat bonds still offer reasonable value from a historical perspective, but to a lesser degree than collateralized reinsurance. Both risk-free rates and cat bond spreads are lower than at the same time last year, while expected losses have remained fairly static.

“As such, loss-adjusted yields are projected to be in the high single digits vs. the low teens at this time last year,” the report concluded.