The second quarter of 2013 saw $2.2bn of non-life catastrophe bonds issued through 14 tranches (representing 10 deals), compared with $2.1bn issued in Q2 2012 through 12 tranches (representing 7 deals), according to Willis Capital Markets & Advisory(WCMA).
This follows hot on the heels of a strong first quarter in which the market saw $1.6bn of issuance, and brings total non-life capacity issued for the year so far to $3.8bn, said WCMA in its latest ‘Insurance Linked Securities’ (ILS) report.
Elsewhere in the report, WCMA raises the question of how far the cat bond and collateralised reinsurance market could expand beyond its mainstay of natural catastrophe perils. “To continue the same pace of growth we have seen in the last few years, the ILS market will need to accept a growing pool of perils,” according to Bill Dubinsky, head of ILS at WCMA.
“Some of these new perils are evolutionary, not revolutionary– such as earthquake risk in areas like Colombia, Chile, Israel and even China. Others may represent a more radical departure from market norms. For example, will investors accept standalone US terrorism risk if TRIPRA is not renewed? Will casualty risk finally become more at home in the capital markets?”
Offering a prediction for the year ahead, Dubinsky added “Our current best estimate for where the ILS market will end up in terms of issuance at the end of the year is $6 to $7bn in non-life issuance (excluding private deals). If sponsors accelerate deal execution into 2013 that would otherwise have occurred in 2014, exceeding $7bn seems quite possible.
“Of course sponsors, the majority of whom are insurers, will be watching the Atlantic and elsewhere to see what surprises Q3 2013 brings. A major storm or earthquake causing significant insured losses could change things very quickly.”
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