Willis ILS Reports 2012 as 2nd Strongest Cat Bond Issuance on Record

January 31, 2013

According to figures compiled for Willis Capital Markets & Advisory (WCMA), part of global insurance broker, Willis Group Holdings, “last year saw the second highest level of catastrophe bond issuance on record signaling strong growth in the market.”

As of the end of the year $5.9 billion of catastrophe bonds had been issued, representing a 37 percent increase over 2011, according to the latest Insurance-Linked Securities (ILS) Market Update from WCMA.

The report noted that the “fourth quarter of 2012 saw new issuance volume of $1.9 billion of non-life capacity. This capacity was issued through seven transactions, which compares with the same volume ($1.9 billion) in nine deals in Q4 2011. Three transactions were sponsored by reinsurers, three by primary insurers and one by a government entity.

“US hurricane risk continues to be the predominant catastrophic natural peril being securitized and sold in the capital markets – with 71 percent of outstanding cat bond limits exposed to some form of US hurricane risk.

“While money continued to flow into ILS funds during the final quarter of 2012, primary issuance was still insufficient to meet investor demand. This triggered bidding wars on some bonds.”

Bill Dubinsky, Head of ILS at WCMA, commented: “Most ILS investors were hoping that early December would be full of new issuances as it had been historically. However, they were disappointed to have fewer bonds than necessary to meet their cash inflows. We believe investors will anxiously welcome the new issuances that are in the pipeline.”

Source: Willis Capital Markets & Advisory/Willis Group Holdings plc

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