Three catastrophe bond transactions totaling USD512 million were completed during the third quarter, none of which contained exposure to U.S. hurricane peril. Excluding quarters in which there was no cat bond issuance, this is the first quarter since 2002 in which there was no transfer of U.S. hurricane risk.
At the conclusion of the third quarter, total 144A issuance for the 2011 calendar year stood at USD2.12 billion, below the 2010 three-quarter mark of USD2.58 billion. However, a substantial transaction pipeline exists for Q4 2011 and into the first half of 2012. Depending on how much of the pipeline converts to actual transactions and when these transactions come to market, it is reasonable to expect total issuance for 2011 to fall between USD3.5 billion and USD4.5 billion.
Additional findings and analysis of recent cat bond transaction activity, including cat bond redemptions, industry loss warranties, market dynamics and the outlook for the fourth quarter of 2011 and the first quarter of 2012 are summarized in Cat Bond Update: Third Quarter 2011. The report is available for download at www.GCCapitalIdeas.com.
Bill Kennedy, CEO of Global Analytics and Advisory, Guy Carpenter & Company, LLC, said: “Our findings show that the cat bond market responded quickly to investor demand for investment opportunities, particularly for diversifying peril transactions. Demand for additional cat bond issuance remains robust.”
Chi Hum, Global Head of Distribution, GC Securities, commented: “Continued volatility in the broader financial markets and comparatively attractive returns are driving net new inflows to the sector, helping to sustain the capital markets as a consistent, complementary source of capacity to the traditional reinsurance market.”