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Catastrophe bond issuance down 23.5%: Willis report


Catastrophe bond issuance was down 23.5% to $2.28 billion during the first nine months of this year compared with the same period last year, according to a report issued Tuesday by Willis Group Holdings P.LC.'s Willis Capital Markets & Advisory operation.

In the quarterly report, “New Non-Hurricane Issues as 2011 Hurricane Threat Recedes,” London-based Willis said the decrease “can be largely attributable” to catastrophe losses during the first half of the year and changes in catastrophe models.

During the third quarter of the year, though, four cat bond issuances in five tranches brought $676 million in new capital into the market. That was a 40.8% increase over the $480 million issued in three deals during the same period a year earlier. Willis noted that the third quarter is traditionally a period of lighter issuance “as the market waits out the hurricane season.”

Willis points out that all five tranches issued in the third quarter were exposed to non-U.S. wind risk. “Despite this diversification, the market remains heavily weighted towards U.S. wind risk, with 67% covering such events,” down slightly from about 71% the previous quarter.

Willis said that with $1.24 billion in European wind exposure slated to mature in the first six months of next year, “this trend of non-U.S. wind issuance is likely to continue.”

Willis also said that it anticipates “robust” issuance the last quarter of this year into the first quarter of 2012. It attributed the optimism to several factors including pent up demand from previous quarters “where model and price uncertainty ruled” as well as tightening spread, especially for perils other than U.S. hurricane.

Last year, $4.8 billion in cat bonds were issued.