The second quarter of 2013 saw $2.2 billion of non-life catastrophe bonds issued through 14 tranches (representing 10 deals), compared with $2.1 billion issued in Q2 2012 through 12 tranches (representing 7 deals), according to Willis Capital Markets & Advisory (WCMA), part of Willis Group Holdings, the global risk advisor, insurance and reinsurance broker.This follows hot on the heels of a strong first quarter in which the market saw $1.6 billion of issuance, and brings total non-life capacity issued for the year so far to $3.8 billion, 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 continued: "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 $7 billion in non-life issuance (excluding private deals). If sponsors accelerate deal execution into 2013 that would otherwise have occurred in 2014, exceeding $7 billion 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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About Willis Capital Markets & Advisory
Willis Capital Markets & Advisory, with offices in New York and London, provides advice to companies involved in the insurance and reinsurance industry on a broad array of mergers and acquisition transactions as well as capital markets products, including acting as underwriter or agent for primary issuances, operating a secondary insurance-linked securities trading desk and engaging in general capital markets and strategic advisory work.
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