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Daily Insurance Industry News
Thursday 20th of September 2018
November 9, 2011

Willis predicts “robust” cat bond issuance

by Gill Montia

Story link: Willis predicts “robust” cat bond issuance

In its latest update on insurance-linked securities (ILS), Willis notes that in the third quarter of 2011, none of the four catastrophe bond issuances (totalling $676 million of new risk capital) had exposure to US hurricane risk.

However, the broker’s ILS quarterly report describes the market as still “heavily weighted” towards US wind risk, with 67% of capital covering such events, down from approximately 71% in the second quarter.

With $1.24 billion of Euro wind exposure scheduled to mature in the first six months of 2012, Willis says the trend for non-US wind issuance will probably continue.

The firm is upbeat about the potential for robust cat bond issuance in the fourth quarter of 2011 and the first quarter of 2012, as the reinsurance market recovers from catastrophe losses and regains confidence after the catastrophe model changes in the first half of this year.

The market update also points to other catalysts for increased issuance going forward including pent up demand from prior quarters; tightening spreads (especially for perils other than US hurricane); and substantial maturities being due in the first half of next year.

Bill Dubinsky, head of ILS at Willis Capital Markets & Advisor, says: “Most of the signs point to a busy year end and first quarter for cat bond issuance and related investor activity.”

Other key findings include:

Cat bond issuance in the third quarter of 2011 was up $196 million over the same period last year, with four issuances representing a total of $676 million, compared with $480 million issued in three deals in the third quarter of 2010.

Year-to-date, the market has seen a total of $2.28 billion in new issuance in 2011, compared with a total of $2.98 billion during the first three quarters of 2010, with the decrease in issuance largely attributed to catastrophe losses and model changes.

A French energy company sponsored the first corporate cat bond since 2007 this quarter, and Willis says that the success of this deal coupled with recent loss activity and the increasing use of the private-deal format could make these transactions more common in the future.

 

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