Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

2010 catastrophe bond volume on track for $5B (so say our readers and Munich Re)


We’ve been running a survey for the last few months for our users which asks what volume of catastrophe bonds they think will be issued during the year 2010 (please take part and let us know your thoughts here). So far our users think that the total volume of cat bonds to be issued during 2010 will be between $4B and $6B.

That’s perfectly in line with an estimate that has come from Munich Re today via an article published by Bloomberg (available to read in full here).

In the article Munich Re says that they expect issuance in the second half of this year to match issuance experienced so far. $2.4B of cat bonds have been sold so far so an estimate of $5B seems about right if that’s the case. Rupert Flatscher, head of risk trading at Munich Re, says that he expects us to see more opportunities for diversification in the transactions which come to market during the rest of this year. That’s a pretty safe bet and we echo that sentiment as the majority of deals have once again been U.S. hurricane focused. Flatscher says that investors are being deterred from buying more hurricane risks, not surprising given the extreme North Atlantic season that has been forecast.

The article also mentions collateral  and says that Munich Re oppose moves to move to LIBOR as the basis of spreads saying that they feel money market funds are the most secure instrument for this purpose. This we feel is going to be a longer conversation amongst market participants and we don’t foresee any change from the current trend of utilising highly rated government treasury bonds as collateral for the rest of this year.

So please do take part and let us know your thoughts on the volume of cat bonds we will see during 2010.

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