Catastrophe Bond Update: Third Quarter 2010 – Activity (and Great Expectations) Persists, Part IV: Outlook for Fourth Q 2010 and First Q 2011
Outlook for the Fourth Quarter of 2010 and First Quarter of 2011
Market fundamentals are supporting a strong bid for new transactions. Issuers are aware of the potential execution benefits associated with bringing transactions in the fourth and first quarters rather than contending with a crowded issuance environment during the second quarter. This is particularly true for U.S. wind exposed transactions. Origination efforts are ongoing across a variety of different perils, risk profiles, structures and triggers. While we expect the focus of the catastrophe bond market will remain on the peak U.S. perils there is also building interest across other non peak-perils. These include European wind, Japanese wind and Japanese earthquake, among others. Indeed, looking ahead to the fourth quarter of 2010 and beyond there seems to be a favorable coincidence of attractive issuance conditions for protection buyers along with a supportive investor base. The perceived spread between reinsurance and catastrophe bond pricing is congruent with the benefits of catastrophe bond protection. The investor base is sustaining legitimate inflows from institutions seeking a stable source of alternative beta rather than opportunistic yields. These factors should contribute to an active issuance environment for the balance of 2010 and an even more active 2011.
• Chi Hum, Managing Director
• Cory Anger, Managing Director
• Hong Guo, Managing Director
• Ryan Clarke, Vice President
• Brad Livingston, Analyst
ILW Market commentary provided by
• Barry Law, Managing Director (Guy Carpenter London)
• David Rothestein, Vice President (Guy Carpenter London)
* Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a US registered broker-dealer and member FINRA/SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Securities or investments, as applicable, are offered in the European Union by GC Securities, a division of MMC Securities (Europe) Ltd., which is authorized and regulated by the Financial Services Authority. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC. MMC Securities Corp., MMC Securities (Europe) Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan Companies, Inc. This communication is not intended as an offer to sell or a solicitation of any offer to buy any security, financial instrument, reinsurance or insurance product.
Chi Hum, Cory Anger, Hong Guo, Ryan Clarke and Brad Livingston are registered representatives of MMC Securities Corp.