CATCo deploys new capital into retro, average returns up 40%

CATCo, the investment manager with a reinsurance opportunities fund listed on the London Stock Exchange, has recently increased its capital base through share issues (article’s here and here on their capital raising activities). Then, we wrote last week that they were expecting to see significant increases in pricing of retrocessional reinsurance which would result in higher returns for their CATCo Reinsurance Opportunities Fund.

Now CATCo have announced this morning that they have deployed their newly acquired capital. They have agreed terms on a number of new reinsurance transactions which will utilise the capital at an average return more than 40% higher than the rates that were written for their 1st January portfolio at renewals.

That’s a huge increase for CATCo to achieve and their investors will be delighted. The increase in retro rates since the events in Japan (and other Q1 catastrophes) shows how keen reinsurers are to top up their protection for the rest of this year. There is some nervousness in the market that reserves have been sufficiently depleted that price increases of 40%+ are worth paying. This could help to make catastrophe bonds a more attractive and affordable alternative to retro in some geographic locations for certain perils.