ILS multiple
The ratio of spread paid to expected loss, measuring how many times the technical risk is compensated.
The multiple divides a note's risk spread by its expected loss. A multiple of four means the investor receives four times the technical cost of the risk it accepts. It is the central valuation indicator of the insurance-linked securities market, the equivalent of a price to earnings ratio in equities: it allows notes with entirely different perils, durations and structures to be compared. It serves comparison across time and space. The absolute level of spreads says little, since a year of high spreads may simply carry heavier risks. The multiple isolates the compensation in excess of cost. It follows the capital cycle: it compresses when capital flows in after loss-free years, and widens sharply after a major event that traps collateral and deters new entrants. Historically, multiples have moved between a little under two and above six across phases.
The average primary market multiple falls from 4.1 in January 2026 to 2.8 in June, after eighteen months with no major event and record inflows into specialist funds. A cedant that placed a 1.5 percent expected loss tranche at a 6.2 percent spread in January replaces it in June at 4.2 percent, saving 2 million euros a year on a 100 million nominal.
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