Moody’s Ratings is consulting on the potential for pooled ILS structures to expand investment opportunities and tailor catastrophe risk exposure, signalling a possible shift in the market landscape.
Moody’s Ratings has opened a consultation on whether pooled structures of insurance-linked securities could become a more practical way for investors to access catastrophe risk and other ILS exposures. The agency said the paper is intended to test market appetite and improve its understanding of how such products should be analysed, rather than to change any current rating approach.
In Moody’s description, a pooled ILS structure would combine multiple instruments, including ILS-backed securities, with losses allocated through a seniority waterfall. That would allow different investors to buy into the same pool at different points in the capital structure, depending on whether they want more protection or higher potential returns.
The idea is not entirely new in the wider structured finance market, but it remains unusual in insurance-linked securities. As Artemis noted, the concept may become more relevant as the ILS market expands and investors look for additional ways to tailor risk. Moody’s said it wants feedback on the data, modelling and legal issues that would matter most if these structures were to gain wider use.
The agency also wants to know whether investors would prefer exposure through a tranche of an ILS-backed security, through direct purchase of individual ILS instruments, or via specialist funds. It said pooled structures could broaden the investor base by offering more remote loss risk in senior tranches, potentially making the asset class accessible to institutions that are currently limited to higher-rated paper.
There is some precedent for that kind of design. The article pointed to earlier transactions such as Nephila Capital’s Gamut Re deal in 2007, which used collateralised-debt-style structuring to package a diversified pool of natural catastrophe risk. It also cited several later transactions that secured investment-grade-type ratings, including issues from Vega Capital, Hannover Re, Leadenhall Capital Partners and Stratosphere Re.
Moody’s is asking a series of specific questions on investor preferences, data transparency, correlations within pooled portfolios, static versus dynamic structures, and the management of extension and reset risk. It is also seeking views on alternative pooled designs and any legal or regulatory hurdles that could affect the market.
Feedback is due by 11.59pm US Eastern time on 15 May 2026, with responses sent to the email address provided by Moody’s.
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Source: Noah Wire Services
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