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8th of February 2012

Cat bonds will “grow and grow and grow”, say experts

Matthew Broomfield 01/09/2010

Cat bonds and insurance-linked securities (ILS) generally will build on a good 2010 and continue growing into 2011, according to industry experts.

The prediction was made during the AM Best-sponsored webinar, State of the Global Reinsurance Markets.

"Cat bonds are very good value at the moment compared to the real/physical market. I'd expect them to grow and grow and grow," said Stephen Hitchcock, managing director at Lockton Re.

And general ILS activity is also expected to grow after a busy first half of 2010. "ILSs have seen a pretty active year in terms of issuance," said Brian Ingle, executive vice president at Willis Re.

"$2.4bn issuance has taken place this year, placing it on par with 2007, which was one of the highest years. It's been an active year, and probably will continue to be so," he said.

However, Christopher Klein, global head of business intelligence at Guy Carpenter, said there might be potential for spot-purchasing, because a lot of reinsurers have exceeded or exhausted their cat budget for this year.

Aon Benfield's review ILS Review 2010 - Market Momentum, released last month, stated that investment return of ILSs had risen by 10 per cent in the past 12 months, primarily because of mark-to-market gains across all perils.

Related reading:

ILS annual returns soar

Tags: A.M.Best, Aon Benfield, Cat bonds, Insurance-linked securities

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