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About $2 billion in catastrophe bond capacity has left the market so far this year with only four second-quarter deals, but cat bond activity looks to pick up for the rest of 2011, according to a unit of Willis Group Holdings P.L.C.
Investors bought only four new cat bonds totaling $592 million during the second quarter, according to New York-based Willis Capital Markets & Advisory. During the same period last year, eight new deals totaling $2.1 billion came into the market.
At the same time, $2 billion in net catastrophe bond capacity left the market so far this year, as bonds came due for repayment and investors lost $300 million in a deal related to the March 11 earthquake in Japan, according to the analysis.
Although the Japanese earthquake, among other first-half catastrophes, didn’t disrupt the market, investors were uncertain about the impact of Risk Management Solutions Inc.’s updated Atlantic hurricane model, the Willis unit said Wednesday.
“The cat bond market should see an uptick in deals in the second half of 2011 as investors get more certainty around how the new RMS hurricane model will affect pricing,” said Bill Dubinsky, head of insurance-linked securities at Willis Capital Markets & Advisory, in a statement.
Other factors, such as recent price increases in certain kinds of catastrophe-exposed property reinsurance, and what happens during the U.S. hurricane season will determine the insurance-linked securities market’s performance for the rest of the year, Mr. Dubinsky said.
The report, “ILS Market Update,” is available at www.willis.com/Documents/Publications.