Cat reinsurance market ‘nears strategic shift’
Third-party capital providers are set to take on increasing amounts of peak catastrophe risk in the future.
This may induce a strategic shift in the catastrophe reinsurance market, according to Willis Capital Markets & Advisory (WCMA), part of Willis Group Holdings.
Private unlisted vehicles and specialist independent catastrophe risk funds will take more of the catastrophe risk market in collateralised form over the medium term, said the report.
There were seven new catastrophe bonds totalling $2.1bn issued in the second quarter of 2012, compared with four deals worth $600m in the same period a year earlier, according to the WCMA’s report, ‘Strong Momentum Continues into 2012 Hurricane Season’.
The stand-out transaction of the quarter was Everglades Re for Florida Citizens, which was the largest single-tranche cat bond ever placed, at $750m.
Bill Dubinsky, head of ILS at WCMA, said: “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 $5.5bn to $6bn range.”