Demand for European and Asian cat bond risks
There is a demand for new catastrophe bond risks because companies want to diversify their investments.
Cat bonds are becoming more affordable as the reinsurance market hardens. They are dominated by US hurricane and earthquake exposures, however, due to the huge amount of supply.
“Currently we’re at a relatively good point where the reinsurance and the capital markets are pricing risks similarly. Cat bonds are providing alterative capacity to the markets,” said Peter Nowell, head of ABS trading for BNP Paribas.
Nowell has been investing in cat bond for the last decade and believes investors are now looking for new risks from Asia and Europe.
“There’s starting to be a market in very small cat bonds, privately placed deals within the $5 to $10m range.
“We would like to see more of these as it encourages some of the small and medium sized enterprises (SMEs) to get involved and shed their risks. These deals are normally unrated.”
However, Michael Serricchio, (pictured) senior vice-president at Marsh captive advisory group, said he has not seen a lot interest in investing in cat bonds in the US. “We have seen really conservative investments or inter-company investments as well,” he added.