March 20th, 2012

Catastrophe Bonds: 2011 Review - Issuance Composition

Posted at 1:00 AM ET

Over the course of 2011, 14 sponsors brought 18 transactions to the 144A market. In terms of transaction count, this places 2011 equal to 2009 as the second most active year in the history of the market. The 2011 sponsor class also included three first-time sponsors and the inaugural securitization of California state workers compensation losses associated with California earthquake events.

Not unlike 2010, 2011 issuance was dominated by US hurricane peril. Of the 30 tranches brought to market, 23 had exposure to US hurricane comprising 73 percent (USD2.83 billion) of the total USD3.87 billion placed. Issuance with exposure to the Asia Pacific region was down from previous years. In the wake of the Tohoku earthquake just one transaction (Loma Re) had exposure to Asia-Pacific risk, as compared to four in 2010, as both investors and sponsors adopted a wait and see approach to the impact the Tohoku event would have on risk modeling, pricing and capacity in the region. With respect to trigger types, index-based trigger structures represented a majority of the issuance as the PERILS trigger continues to increase its market share for European Windstorm issuance. Of the eight transactions that had exposure to European Windstorm, only one (Pylon II Capital Limited) did not use an index trigger based on PERILS reported loss data.

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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. 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. Cory Anger and Chi Hum are registered representatives of MMC Securities Corp.

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