For many insurance-linked securities (ILS) managers, 2020 has been another challenging year, with the spectre of trapped collateral rearing its ugly head again. Uncertainty caused by the COVID-19 pandemic, combined with a series of more reasonably anticipated smaller events such as hurricanes Zeta and Delta, has eroded the retentions of aggregate covers for a number of the larger insurers.

With the continuing loss creep of 2017 from Hurricane Irma the process of collateral release to investors, or redeployment to following years, by ILS managers has been made extremely difficult. Some investors are withdrawing from the ILS space. Others are sharpening their knives for disputes. Some ILS operations have moved to the evergreen, rated paper model instead.