Catastrophe bonds on hold; pipeline to flow again soon

by Artemis on November 24, 2008

There’s a Reuters story (available here via Insurance Journal) in the press discussing the current slowness in the catastrophe bond market despite the fact that they remain in favour with investors.

The story highlights the fact that there are at least $2b worth of bonds in the pipeline some (or all) of which may get issued before year end. Goldman Sachs say that interest remains high among potential sponsors.

It seems that the market has put the brakes on as a reaction to the current economic climate and issues such as the Lehman related cat bond defaults. It appears that the market is going through a period of maturation as issuers, brokers and investors all slow things down and put measures in place to ensure any future deals are structured in the best possible manner.

With reinsurance renewals coming up and rates appearing to be on the turn the near-term future looks good for further issuance of catastrophe bonds. The shake up of the credit markets could in the end be a good thing as it has helped to strengthen the reputation of cat bonds as an investment vehicle and forced issuers and structurers to ensure any bonds have minimal underlying links to credit risks and sufficient collateral to back them up.

We’ll bring you coverage of any future catastrophe bond deals in our Deal Directory.

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