Insurance-linked securities market surges in 2012 first half: Swiss Re
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The first half of 2012 was the most active first half for the issuance of insurance-linked securities since 2007, according to an analysis released Wednesday by Swiss Re Ltd.
The report, “Insurance-Linked Securities: Market Update,” estimates that approximately $3.6 billion worth of catastrophe bonds, issued in 16 transactions and 28 tranches, entered the market in the first half of 2012. The total outstanding amount of catastrophe bonds at the end of the first half of 2012 was $14.7 billion, which outstripped 2011's year-end total of $13.7 billion.
The new capital is indicative of a growth trend for the ILS market, the report states.
“Since the end of the 2011 hurricane season, the ILS market has seen a flurry of issuance,” according to the report. “New and repeat sponsors have been attracted by the diversifying capacity source, as well as by price levels that are increasingly competitive with traditional reinsurance.”
Prominent among the new entrants is Everglades Re Ltd., a Bermuda-based special purpose reinsurer established to issue securities for Jacksonville, Fla.-based Citizens Property Insurance Corp. Designed to cover Florida hurricane risk, the $750 million in securities issued by Everglades Re are the largest single tranche in the history of the ILS market, the report states. Indeed, U.S. hurricane risk was the most common peril covered by the bonds, appearing in 23 out of the 28 tranches.
“Historically, sponsors had primarily waited until the second quarter, the period directly preceding the North Atlantic hurricane season, to access the capital markets,” the report states. “However, sponsors have recently seen improved execution in the first quarter and have increasingly sought to bring deals to market earlier in the calendar year.”
