The catastrophe reinsurance market may be on the cusp of a strategic shift, with third party capital providers set to take on increasing amounts of peak catastrophe risk in the future, according to Willis Capital Markets & Advisory (WCMA).
The latest Insurance-Linked Securities (ILS) Market Update from WCMA, Strong Momentum Continues into 2012 Hurricane Season, reports that private unlisted vehicles, along with the growing specialist independent catastrophe risk funds, will take an increasing share of the catastrophe risk market in collateralised form over the medium term.
WCMA reports that there were seven new catastrophe bonds totalling US$2.1bn issued in the second quarter of 2012, compared with four deals worth US$600m in the same period a year earlier. The stand-out transaction of the quarter was Everglades Re for Florida Citizens. At US$750m, the two-year deal was the largest single-tranche cat bond ever placed.
Bill Dubinsky, head of ILS at WCMA, said: “The current market outlook is very encouraging. Reduced risk spreads as a result of strong investor demand and available capital should stimulate increased issuance from sponsors in the future. In the absence of a significant catastrophe, we would expect the total issuance for this year to be in the US$5.5bn to US$6bn range.”
According to the report, outstanding on risk-capacity increased by just over US$700m during the second quarter to US$14bn. US hurricane exposed transactions continue to dominate the non-life market, with 73% of outstanding cat bonds exposed to US hurricane risk of some form.
Printed Copy:
Would you also like to receive CIR Magazine in print?
Data Use:
We will also send you our free daily email newsletters and other relevant communications, which you can opt out of at any time. Thank you.
YOU MIGHT ALSO LIKE