S&P say cat bonds to slow in 2008


Standard & Poor’s recently held a conference titled “Insurance-Linked Securities Conference: Current Trends and Future Prospects for ILS”. A panel of highly respected speakers within the market were present including Shiv Kumar of Goldman Sachs, Peter Nakada of RMS, Beat Holliger of Munich Re Capital Markets and Gary Martucci of S&P.

The main take out of this event was that industry leaders tend to agree that 2008 will not repeat the record issuance seen in 2007, due to the lack of significant catastrophes and the softening in traditional markets which make finding reinsurance so much easier.

Shiv Kumar said that as part of the overall risk management mix insurance linked securities are definitely here to stay. 8% of catastrophe limits worldwide are secured by cat bonds and the market itself remains robust at this time.

Peter Nakada highlighted that more primary insurers than ever are issuing their own cat bonds rather than seeking reinsurance. He also discussed the range of new structures such as securitization of reinsurance recoverables or cat bonds aimed to protect against money markets exposures.

Gary Martucci of S&P said that the one cat bond they continue to refuse to rate is anything linked to terrorism risks or where human actions constitute some of the risk, this despite modelling firms insistence that they can accurately model those risks.

Further commentary is available on the Standard & Poor’s website (login required).

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