Catastrophe bonds and insurance-linked securities news

Global law firm Dentons has appointed new hire John J. Sarchio as a partner in the Insurance Regulatory practice. Sarchio has experience in insurance and reinsurance transactional law, including catastrophe bonds, sidecars and other ILS arrangements.

All three tranches of the Laetere Re Ltd. (Series 2016-1) catastrophe bond and the single tranche of the First Coast Re Ltd. (Series 2016-1) cat bond, traded down at lower and even distressed pricing at the back-end of last week due to hurricane Matthew’s approach.

The Swiss Re Global Cat Bond Index has declined by the largest amount since 2012 on the threat posed by hurricane Matthew’s approach towards Florida, as mark to market losses flowed through into investor and brokers cat bond pricing expectations.

Hurricane Matthew’s close encounter (so far) with the Florida coastline, and as Georgia and South Carolina are also set to feel the hurricane’s force, could be the first real test for insurance, reinsurance and insurance-linked securities (ILS) players in recent years, according to rating agencies and equity analysts.

The risk of a major insurance and reinsurance industry loss seems to have decreased with the last few forecast updates for hurricane Matthew, as the path looks more likely to remain offshore of the Florida and southeast U.S. coastline.

According to rating agency Standard & Poor’s there are 15 catastrophe bonds it has given ratings to that are most exposed to hurricane Matthews impact on the Florida and U.S. eastern coastline. We also highlight a few which are not S&P rated and that we believe to be among the more exposed.

Hurricane Matthew has the potential to trigger outstanding catastrophe bonds and other ILS structures, based on latest forecasts, but significant uncertainty remains and exactly how close the storm gets to making landfall could wildly sway the eventual insurance and reinsurance industry loss.

The Insurance Development Forum (IDF) has expressed its support of the G7 InsuResilience target and proposed the formation of a Technical Assistance Facility (TAF), which, aims to support increased insurance penetration in emerging regions and that could be supported by the insurance-linked securities (ILS) space.

Hurricane Matthew has the potential to be a significant loss event for the insurance and reinsurance industry. It could also cause issues to some catastrophe bonds, eroding aggregate retention and increasing their attachment probabilities, according to Ben Brookes of RMS.

The cat bond lite, or private cat bond sector continues to evolve as the size of transactions increase and issuance levels remain strong in 2016, underlining the value of the space for both investors and sponsors, reveals PCS.