Posts Tagged ‘GC Securities’
The growing influence of alternative markets capacity is pressuring traditional reinsurers’ business model and challenging them to compete against a model with lower-cost of capital that continues to enter the reinsurance market. Most reinsurance companies have responded to the challenge by leveraging their incumbent status on reinsurance programs, offering similar or better terms and similar or reduced pricing. Particularly, traditional players are emphasizing their ability to efficiently provide reinstatements, which are seen by many as a critical part of core reinsurance programs, particularly for working reinsurance layers. Traditional players are also hedging their bets and creating their own capital markets divisions to attract, manage and utilize capital from third-party sources whether in the form of fund management, managed accounts or sidecars. This will allow reinsurers the opportunity to securitize the most capital-intensive parts of the business while providing valuable cost-efficient capacity in other business lines.
GC Securities, a division of MMC Securities Corp., a U.S. registered broker-dealer and member FINRA/NFA/SIPC, today announced the placement of the Principal At-Risk Notes, with notional principal of $100,000,000, through a newly formed catastrophe bond, Queen Street IX Re Limited, to benefit Munich Re. This is the ninth Queen Street cat bond to benefit Munich Re, the eighth overall cat bond issuance benefitting Munich Re since 2011 and the first cat bond issuance benefitting Munich Re provided via an Irish special purpose reinsurance vehicle.
Fourth quarter activity began on October 15, 2013 with AXA returning to the catastrophe bond market to issue Calypso II. At the end of October, Catlin issued Galileo Re, their first transaction since 2008. November saw no sponsors come to market. Then there was a flurry of activity in December starting with USAA and AIG both returning to the market for a second time in 2013 with Residential Re 2013-2 and Tradewynd Re 2013-2, respectively. Residential Re 2013-2 Class 1 Notes carried an expected loss of 14.23 percent, making it the second riskiest tranche issued of all time in the 144A catastrophe bond market (the riskiest being Successor I Class B-II issued in 2008 benefiting Swiss Re with an expected loss of 14.73 percent).
Influence from direct capital markets’ participation in reinsurance programs, coupled with catastrophic insured losses well below historical averages in 2013, put significant pressure on global catastrophic reinsurance pricing. As a result of significantly reduced pricing (relative to recent years), approximately USD7.1 billion worth of new property/casualty (P&C) catastrophe bonds were issued in 2013 - the second largest record year for P&C issuance. The year included seven new sponsors - American Coastal, American Modern, AXIS Capital, the Metropolitan Transportation Authority (MTA), QBE, Renaissance Re and the Turkish Catastrophe Insurance Pool - who collectively secured USD1.46 billion of catastrophe bond capacity. In addition to new sponsors, another prevalent change in the market was the increasing use and acceptance of indemnity-based triggers. Given that spreads have tightened between indemnity and other trigger types, sponsors were inclined to take advantage of investors’ openness to indemnity triggers to reduce coverage basis risk without a material increase in pricing relative to non-indemnity trigger pricing.
GC Securities, a division of MMC Securities Corp., a U.S. registered broker-dealer and member of FINRA/SIPC, today released an analysis of activity and trends within the catastrophe risk market from the fourth quarter of 2013, also including the outlook for 2014. According to the report, influence from direct capital markets’ participation in reinsurance programs, coupled with catastrophic insured losses well below historical averages in 2013, put significant pressure on global catastrophic reinsurance pricing. As a result of significantly reduced pricing, relative to recent years, approximately $7.1 billion worth of new property and casualty (P&C) catastrophe bonds were issued in 2013 - the second highest record year for P&C issuance.