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Issuance of nonlife catastrophe bond capacity in the first quarter of 2014 slipped slightly from first quarter 2013 levels, according to a new report issued Tuesday from Willis Capital Markets & Advisory, part of Willis Group Holdings P.L.C.
But markets remain optimistic about further growth of insurance-linked securities, according to “ILS Market Update: Declining Spreads and Flexibility in Structuring.”
The first quarter of this year saw $1.2 billion of nonlife catastrophe bond capacity issued in six deals, compared with $1.6 billion during the same period in 2013, the report said. The first quarter 2013 figure included certain transactions marketed in the first quarter and closed at the beginning of the second quarter, according to Willis Capital Markets.
Despite the decline in hard figures, the report said the first quarter of 2014 saw increased participation from money managers and mutual funds investing directly in insurance-linked securities and that the second quarter of 2014 is on course for strong levels of issuance, according to the report. The bulk of the deals are likely to include U.S. hurricane exposure with some “opportunistic tranches” thrown in to satisfy investors’ desire for further diversification in their portfolios, Willis said.
“Money managers, mutual funds and ILS specialist investors still see significant value for their investors despite the fall in market clearing spreads,” Bill Dubinsky, head of ILS at Willis Capital Markets, said in a statement accompanying the report.
“With increasingly savvy sponsors and brokers, accelerating speed to market, a favorable spread environment, and more flexible terms, the next quarter could well break the previous Q2 record for nonlife cat bond issuance ($2.6 billion in 2007),” said the report.
The report can be accessed here.