Daily Insurance Industry News
Daily Insurance Industry News
Monday 27th of May 2019
July 24, 2012

Strategic shift for catastrophe reinsurance market

by Gill Montia

Story link: Strategic shift for catastrophe reinsurance market

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.

According to Willis Capital Markets & Advisory’s (WCMA) latest insurance-linked securities update, private unlisted vehicles and growing specialist independent catastrophe risk funds will take an increasing share of the market in collateralised form over the medium term.

During the second quarter of 2012, there were seven new catastrophe bonds issued totalling $2.1 billion, compared with four deals worth $600 million in the same period of 2011.

The major transaction in Q2 2012 was Everglades Re for Florida Citizens – at $750 million, the two-year deal was the largest single-tranche cat bond ever placed.

Bill Dubinsky, head of insurance-linked securities at WCMA, comments: “Reduced risk spreads as a result of strong investor demand and available capital should stimulate increased issuance from sponsors in the future.”

He adds: “In the absence of a significant catastrophe, we would expect the total issuance for this year to be in the $5.5 billion to $6 billion range.”

According to the report, 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.


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