The New Year seems to be starting with a bang for the ILS industry.  On January 23rd, KKR announced it had taken a 24.9% stake in Nephila.  Earlier in the month Validus reported a $400 million capital raise to fund investments in collateralized reinsurance and ILS.  In a transaction on which Edwards Wildman Palmer LLP advised Transatlantic Re, Transatlantic Re in December acquired a minority interest in Pillar Capital Management and announced a strategic partnership with Pillar, a manager of funds investing in collateralized reinsurance and ILS.

These transactions indicate there is a strong interest in investing in insurance risks among a wide-range of investors both financial and strategic.  Clearly, investors expect that there will be demand for collateralized reinsurance and ILS to fill gaps in market capacity and offer pricing options tailored to ceding company requirements.  Collateralized reinsurance and ILS also provide opportunities for cedents to reduce credit exposure to the traditional reinsurance market in general and/or to a concentration of risk to a single or group of reinsurers specifically.

We will continue to monitor developments in the ILS industry and report periodically here.  Should you have more specific questions about collateralized reinsurance or ILS, please contact Jeff Etherington, getherington@edwardswildman.com, or Albert Pinzon, apinzon@edwardswildman.com, who are both partners in our New York City office.