Insurance-linked securities could break annual record despite weak 3rd quarter
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Despite a slow third quarter for insurance-linked securities which only saw one transaction come to market, 2014 will still likely surpass 2007’s record year for these non-life securities, according to a report issued Thursday by Willis Group Holdings P.L.C.’s Willis Capital Markets & Advisory.
“Q3 issuance was comparatively slow relative to the record breaking second quarter, with quarterly issuance volume the lowest since 2010,” said the report titled “No Surprises.”
The only transaction this quarter was Golden State Re II, which closed Sept. 16 and provides California's State Compensation Insurance Fund, California's largest workers compensation insurance provider, with $250 million of fully collateralized coverage for workers compensation against California earthquake risks for a period of just over four years.
The latest quarter also pales compared with a record breaking third quarter 2013 when $1.4 billion of non-life catastrophe bond capacity was issued, Willis said in its statement.
Senior Willis executives, however, remain confident that 2014's total will still surpass the just over $7 billion issued in 2007.
“Q3 followed a robust issuance season with new capital having already been deployed. It will only take about $1.2 billion more in 2014 to break 2007's non-life ILS issuance record, so we believe this is incredibly likely,” said Willis Capital Markets & Advisory CEO Tony Ursano in a statement.
The slow quarter was not unexpected, and 2014 non-life ILS issuance could top $8 billion.
“A quiet Q3 was not surprising. 2014 is still on track to be a record breaking year, and we maintain our prediction of a final tally between $8 and $9 billion of non-life ILS issuance,” said Bill Dubinsky, head of ILS at Willis Capital Markets & Advisory, in the statement.
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