Thursday, 17 May 2012
Cat bond market issued record $1.3bn in Q1 but upward pressure on pricing
The first quarter of 2012 was the most active on record for the global catastrophe bond market with $1.34bn of risk capital issued through eight transactions, according to figures from GC securities, a division of MMC Securities Corp.
Aftermath of the Japanese earthquake and tsunami of last year that caused severe business interruption
However, with the cat bond market attuned to the heavy catastrophe losses in 2011 most transactions priced at, or higher, than the top end of their initial price guidance. This caused upward pressure on pricing.
The $134bn figure exceeded the previous record £1.02bn issued in the same quarter of last year.
“The level of issuance achieved in the first quarter demonstrates that both protection sellers and buyers are seeing strong value in the insurance-linked securities market. Record issuance combined with new perils, structures and investors illustrate the continued growth and maturity of the catastrophe risk asset class," said Chi Hum, Global Head of ILS Distribution at GC Securities.
Please sign up here to our full-time mailing list to ensure that you receive our weekly newsletter.
According to GC Securities this year’s first quarter issuance was ‘significantly’ more diverse than in 2011. In the first quarter of last year all transactions included exposure to US hurricane risk, whereas in Q1 2012 both California and Japanese earthquake perils were marketed on a standalone basis.
Cory Anger, Global Head of ILS Structuring, GC Securities said: "In the first quarter of this year, sponsors sought to lock in capital markets’ capacity for a diverse array of perils and structures in a somewhat uncertain traditional market environment. Capital providers proved up to the task, although with some upward pressure on pricing."
GC Securities also reported that total risk capital outstanding increased by 5.2% in Q1 to $12.77bn from $12.14 bn.
Catastrophe bond redemptions amounted to the equivalent of $711.3m of risk capital.
Please sign up here to our full-time mailing list to ensure that you receive our weekly newsletter.
Time to ‘end the deadlock’ on CBI says DVS commitee
Fluid capital may curtail hard market but brings risks for mutuals
Fitch expects July rate rises to be limited
Rates tumble after liberalisation but product innovation still low
Reinsurers exposed to further cat losses despite improving rates says Fitch
Canopius to acquire Omega and form partnership with Tower Group
Asian rates up at April reinsurance renewals with tougher terms for BI
Reinsurers raise rates but stay in support of Asia Pacific region
Harder times ahead-Rudi Flunger
Willis Re reports improved start to 2012 for reinsurers
Lloyd’s posts £516m loss in 2011 fueled by record £4.6bn cat claims
Fitch upgrades SCOR to 'A+' with stable outlook
Renewals bun fight delayed another year as European reinsurers report respectable 2011
A brave face in Bermuda
Reserves release of $1.3bn boosts Swiss Re profits
Fitch sees Bermuda market as ‘fundamentally resilient’
Reinsurance trade groups warn of damage caused by protectionist regulations
Reinsurers fail to impose big rate increases as capital levels hold up
Munich Re confirms 2011 costliest disaster year ever
Profitability is main challenge in emerging markets—Swiss Re
