Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Catastrophe bond issuance in 2012 now surpasses 2011 total


Thanks to the three latest catastrophe bonds of 2012 which all finished doing the investor rounds and priced this week (Mythen Re Ltd. (Series 2012-2)Atlas Reinsurance VII Ltd and Queen Street VII Re Ltd), the total volume of cat bonds issued this year has already surpassed the total issued in 2011. With more than two months to go in 2012 the magic $6 billion figure definitely looks attainable and the market should easily achieve that given the pipeline discussions we’ve had with our contacts.

These three new cat bonds have added just over $500m of risk capital to the cat bond market in the last few days, taking total 2012 issuance volume from just over $4.7 billion to the new total of approximately $5.219 billion (approximately because of a number of EUR to USD conversions). We’re using our Deal Directory for these numbers, so don’t expect them to exactly tally with other reports from brokers and the like as we include some unrated deals and life/health ILS transactions. However, we’re comparing like with like from the last two years and 2012 is clearly doing very well.

As far as our Deal Directory goes, 2012 is now the second best for the catastrophe bond market on record, with 2007 still leading the way at approximately$8.3 billion, 2012 now at $5.2 billion (with two months to go) and next highest being 2010 with just under $5.1 billion.

In a recent managers report, the LGT Insurance-Linked Strategies team said that market expectations were for 6 to 8 new transactions to come to market before the end of 2012. We’re not sure whether the three recent deals were part of those expectations or not. The LGT team said that they expect 2012 issuance to be between $6 billion to $7 billion, in line with our own expectations. Other market participants have told us they expect ‘At least five more cat bonds’ in the last two months of the year.

2012 is proving to be a very good year for the catastrophe bond market, with both sponsors and investors benefitting from the market conditions so far this year. Investors have seen their best returns in a number of years while sponsors are placing risk with investors more cheaply than perhaps has ever been done before in the ILS market. It will be interesting to see what the last few months of the year bring to market.

You can find details on every cat bond transaction so far this year in our comprehensive Deal Directory.

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