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SCOR CEO says wildfire ILS growth depends on better catastrophe models
SCOR executives said wildfire risk has expanded sharply over the past five years, driving larger climate change loss loads for insurers.
SCOR CEO Thierry Léger said during the company’s earnings call that the market for wildfire insurance-linked securities, or ILS, could grow, but issuance volume would rise only as catastrophe wildfire models improve.
Léger said modeling is a key constraint for ILS coverage, arguing that investors and issuers need reliable models because fire behavior is difficult to represent. He added that greater understanding of how climate change influences the wildfire peril should support more activity over time, with smaller issuances appearing first.
He also pointed to a sharp rise in wildfire losses over the last five years, saying insurers face a growing climate change related loss load across perils including hail, flood, and wildfires. Despite that, Léger said he sees ample capacity for wildfire risk in the traditional insurance market and does not view ILS as necessary for wildfire capacity.
SCOR’s Group CFO Philipp Rüede added context for why the U.S., particularly California, has been prominent in catastrophe bonds, noting that capital markets products often target the most extreme “peak of the peak” and more remote coverages where investor appetite is stronger. He said diversification benefits and California’s size have contributed to past transactions, but he expects limited growth concentrated in that segment.