Insurance linked securities taking larger role in catastrophe reinsurance: Willis
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The catastrophe reinsurance market may be about to undergo a “significant strategic development,” according to a report issued Monday by Willis Group Holding P.L.C.'s Willis Capital Markets & Advisory division.
Private unlisted vehicles as well as specialist independent catastrophe risk funds are likely to gain a larger share of the catastrophe risk market in collateralized form over the medium term, according to Willis' latest Insurance Linked Securities Market Update report, “Strong Momentum Continues into 2012 Hurricane Season.”
“In our view, we may be seeing the early stages of a significant strategic development in the catastrophe reinsurance market,” said the report. “In the future, we believe increasing amounts of peak catastrophe risk will be taken by third-party capital providers writing alongside existing reinsurance businesses.”
The report said there were seven new catastrophe bonds totaling $2.1 billion issued in the second quarter of 2012. That compares with four deals worth $600 million in the same period a year earlier.
“The current market outlook is very encouraging,” said Bill Dubinsky, New York-based head of ILS at Willis Capital Markets & Advisory, in a statement. “Reduced risk spreads as a result of strong investor demand and available capital should stimulate increased issuance from sponsors in the future. In the absence of a significant catastrophe, we would expect the total issuance for this year to be in the $5.5 billion to $6 billion range.”
The report is available here.
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