Equity index for the global specialty (re)insurance sector
|RISX Price Return Index ('RISX') 3,682.69 +26.89 (+0.74%) At close: 30 November 2023||RISX Net Total Return Index ('RISXNTR') 5,832.62 +43.16 (+0.75%) At close: 30 November 2023|
The ICMR (Re)Insurance Specialty Index (RISX) is an equity benchmark for the global specialty (re)insurance sector based on publicly listed companies with underwriting subsidiaries in the Lloyd’s of London specialty (re)insurance market.
The RISX Index was developed by Insurance Capital Markets Research (ICMR) and is administered and calculated daily by Morningstar Indexes Ltd, as a Price Return Index (Ticker: ‘RISX’) and a Net Total Return Index (Ticker: ‘RISXNTR’), i.e. dividends reinvested net of withholding taxes.
©Insurance Capital Markets Research. Index administrator and calculator: Morningstar Indexes Ltd. Inception date: 2006-06-16, base value: 1000. All performance shown prior to 2021-03-22 was retrospectively calculated by application of the Index Methodology. The historical RISX index data is available via Bloomberg, Refinitiv or on request from ICMR.
The RISX index is the first equity benchmark for the global specialty (re)insurance sector. Specialty (re)insurance is a discrete and important subset of both non-life insurance and wider financial services. A selected group of global (re)insurance carriers offer specialty (re)insurance, most of them underwrite a wide portfolio of risks to achieve diversification and capital efficiency. That’s why there is no standardised classification of such companies.
The centre of the global specialty (re)insurance syndication is the Lloyd’s of London marketplace. The performance of Lloyd’s is seen as a benchmark for the industry. The RISX index is based on the listed companies that participate in Lloyd’s, which account for over ⅔ of Lloyd’s premium, and underwrite over 25% of all global non-life (re)insurance premiums (c.USD 500Bn part of USD 1.8Trn annually).
The RISX constituents are premium weighted in the index, not market capitalisation weighted, to better replicate the underlying risk profile of specialty (re)insurance. This produces an index with currently 29 constituent companies based across the globe that mimics the risk profile of Lloyd’s. That’s why RISX is a benchmark for the value creation of the global specialty (re)insurance industry and a proxy for Lloyd’s.
Large and complex risks, such as natural catastrophes and pandemics require syndication across many highly rated global (re)insurance companies.
Specialty risks such as wind parks, cyber attacks, transport of vaccines, fine art and money, trade credit in emerging markets, film productions, clinical trials, product liabilities, infrastructure constructions, accident & health insurance in high risk regions require expert underwriting knowledge and portfolio modelling capabilities to offer the protection needed.
Without such risk transfers new investment wouldn’t take place and accidents and natural catastrophes would bankrupt companies and families.
Climate change and the transition to net-zero require significant investments and changes to global energy supplies, infrastructure and trade. The global specialty (re)insurance industry with its ability to model natural catastrophes and syndicate risks will be central to achieve the net-zero goals. Swiss Re estimated that premiums for non-life insurance will double by 2040 to USD 4Trn (Sigma 4/2021).
Specialty (re)insurance plays an important role within society, making communities more resilient. It has environmental, social and governance factors at its core. But in many ESG and sustainability portfolios specialty (re)insurance is an underappreciated sector.
The income of any insurance business is generated from underwriting and investment income on its ‘float’, i.e. the premiums received, but not yet used to pay back losses or other costs.
The key risk drivers for specialty (re)insurers are claims fortuity, i.e. the occurrence of loss events, such as wind storms, floods and earthquakes, latent risks which only emerge over time and the dynamic between these and investment cycles.
Since pure underwriting income can be volatile, the investment policy of most specialty (re)insurers is very prudent, with a high proportion of investments in highly rated government and corporate bonds and only a small exposure to equities.
Global specialty (re)insurance follows a cycle, but it typically is acyclical with GDP. For example, immediately following a major claims event, the investment market might be subdued, whereas underwriting pricing usually strengthens significantly. This acyclicality leads to lower correlation with market risk. Even the RISX index, itself a pure equity index, has a lower correlation with market risk than other financial service or wider insurance equity indices.
Qualification for inclusion in the index derives from having a subsidiary operating within the Lloyd’s of London specialty (re)insurance market. Index constituents are highly regulated and rated entities, with Lloyd’s itself (under its delegated powers) ensuring “fit & proper” status for market participation and approval of any market growth plans.
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RISX: Price return, RISXNTR: Net total return, i.e. dividends reinvested net of withholding taxes
For further information see key documents below, or contact ICMR.
The what and why
Summary of key statistics
Overview and background
Sharing risk for a more resilient world
Selection and weighting process
UK and EU BMR Benchmark Statement
ICMR launches RISX Index with Moorgate Benchmarks
Insurance Capital Markets Research is the trading name of IC Markets Research Ltd, registered in England & Wales with number 12561699
At Insurance Capital Markets Research (ICMR), we provide quantitative research on the global specialty (re)insurance industry. Our clients are insurance carriers, intermediaries and investors.
One of our core capabilities is the independent assessment of performance and return profiles of insurance entities and portfolios, both within Lloyd’s and globally. Our research focuses on investment strategies and the development of products to access the global specialty (re)insurance industry and Lloyd’s of London in particular.
Our founders were Lloyd’s former heads of analysis and research who also worked together in the capital markets and insurance linked securities. ICMR was established in early 2020 and launched the RISX Index in 2021.
For more information, licensing and contact details visit: https://insurancecapitalmarkets.com
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