Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Catastrophe bond market reaches highest issuance level since 2007


The active catastrophe bond and insurance-linked securities issuance that we’ve seen so far in 2012 has now hit its highest level for this point of the year since 2007, according to A.M. Best in an article in their BestWeek magazine. In the first-half of 2007, 20 cat bonds came to market with a total value of $4.03 billion according to Best’s data. So far in 2012 we’ve got 16 transactions listed in our cat bond and ILS Deal Directory with a total value of $3.588 billion, making 2012 the second highest issuance level on record.

By comparison, 2011 saw just 8 cat bonds with a value of $1.61 billion in the first-half of the year, so 2012 has more than doubled last years six month record. The future looks bright for the remainder of 2012 with investor demand at a high and interest in cat bonds and ILS as a diversifying form of reinsurance or risk transfer popular among both insurers and reinsurers looking for capacity. 2012 could come very close to the record issuance seen in 2007.

“2007 was an exceptional year,” said Asha Attoh-Okine, managing senior financial analyst of insurance-linked securities at A.M. Best Co. “But this year might match it. It’s looking very bright.”

“The growth of cat bonds is being driven in part by investor demand,” Attoh-Okine continued. “People are looking for yield, and returns on other investments are low right now,” he said. “Some cat bonds have a spread as high as 22%, which is a lot in this market.”

We’ll update you at the end of the second quarter on the total level of cat bond issuance.

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