Catastrophe bond risk capital outstanding increases in 2011

by Artemis on January 5, 2012

Catastrophe bond risk capital outstanding, or the amount of active cat bond capital actually in the market at any one time, has risen during 2011 after a four year period of slow decline. Data from broker Aon Benfield’s recent Reinsurance Market Outlook report shows that the slow decline that started during the financial crisis in 2008 has finally halted and a small upturn in the amount of risk capital outstanding has been recorded at the end of 2011.

After the record $8 billion+ of catastrophe bond and insurance-linked security issuance in 2007 the market was impacted by the global financial market confidence levels in 2008 and has never recovered the volumes of issuance seen in that one heady year. As issuance slowed existing cat bonds continued to mature and in some years maturities outpaced issuance meaning that the overall size of the market shrank slightly.

Aon Benfield recorded $4.6 billion of issuance in the public 144A cat bond and ILs market. This figure was sufficient to increase the amount of cat bond risk capital outstanding at year end. The fact that the market achieved overall growth despite the many issues it faced during 2011 and the lower than had been expected issuance demonstrates the maturity and resilience of this sector and bodes well for the future.

The outlook for 2012 looks healthy, Aon Benfield say that the forward pipeline for Q1 2012 looks like it will be active, and with a lower level of maturities expected than in some previous years meaning that we could see an even larger jump in risk capital outstanding by the end of 2012.

Outstanding Catastrophe Bond Issuance

Outstanding Catastrophe Bond Issuance - From Aon Benfield Securities

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