Latin America and Caribbean
In the Latin America and Caribbean region excluding Chile, terms and conditions in the property excess of loss and pro rata lines were unchanged at the July 1 renewal.
This chart represents the 144A Catastrophe Bond market. Capital outstanding peaked at approximately USD14 billion in 2007 and has remained fairly stable at approximately USD12 billion. It should be noted that other formats exist for investors, in addition to the 144A realm, such as the industry loss warranty market and collateralized reinsurance.
Source: Guy Carpenter & Company, LLC
*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.
GC Securities, a division of MMC Securities Corp.*
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In the first quarter of 2010, two catastrophe bond transactions were completed, and USD300 million of risk capital was issued (1). In response to strong investor demand, both transactions closed within initial price guidance and were upsized relative to announced placement targets. While this activity furthers the integration of the capital markets into the risk management processes of protection buyers, on balance, issuance volumes for the quarter were perhaps a bit lighter than expected at the close of 2009.
On a standalone basis, the two most frequently securitized perils are U.S. hurricane USD(7.08 billion) and U.S. earthquake(USD 4.71 billion). Other perils securitized on a standalone basis include European windstorm, Japanese earthquake and, to a lesser extent, Japanese typhoon. Multi-peril transactions, in which the same dollar of risk principal is exposed to at least two or more perils accounts for 42 percent of total risk principal issued. Insurance linked securities (ILS) investors typically prefer single-peril / single-zone transactions as they provide greater ability to construct granular portfolios according to each investor’s risk preferences. ILS sponsors however, particularly large national and global writers with aggregate concerns across multiple perils and geographic zones, often prefer to economize risk transfer spend by applying a single limit across different non-correlated perils, for example U.S. hurricane and earthquake.
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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.
David Priebe, Chairman of Global Client Development *
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The third quarter is usually quiet for the catastrophe bond market, and 2009 was consistent with past years. Issuers completed two transactions, bringing USD412 million in risk capital to the market. Nonetheless, risk capital issued was up by a third relative to the same quarter last year, as both catastrophe bonds issued were upsized considerably. The consensus estimate for the entire year remains USD3 billion to USD4 billion, implying a strong fourth quarter for primary issuance.
David Priebe, Chairman of Global Client Development
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A year ago, (re)insurers’ access to capital markets was in doubt. A worldwide financial crisis decimated balance sheets, sent equity values tumbling and caused credit markets to come to a standstill. Today, however, the situation has changed completely. Catastrophe bond issuances have resumed, and the mergers and acquisitions (M&A) market is gaining momentum. (Re)insurers are turning to capital markets to address a wide range of strategic and tactical needs. It is clear that this source of capital remains both viable and reliable.
Guy Carpenter & Company, LLC hosted “Capital Creativity — the Road to Renewals,” the Baden-Baden Reinsurance Symposium held in Baden-Baden on October 25. The event focused on the effective management of capital in the (re)insurance industry.The symposium was moderated by Chris Klein, Global Head of Business Intelligence at Guy Carpenter. Henry Keeling, President and CEO of International Operations at Guy Carpenter, provided the opening remarks, followed by presentations from Luzi Hitz, CEO of PERILS; Clemens von Weichs, CEO of Allianz SE, Reinsurance Division; and Victor Peignet, CEO of SCOR Global P&C. Wolfgang Gerstner, Lord Mayor of the City of Baden-Baden, welcomed attendees to the city.
GC Securities, a division of MMC Securities Corp.*
Contact
The third quarter is traditionally quiet for the catastrophe bond market, and 2009 was no exception. Two transactions were closed, resulting in USD412 million in new risk capital.1 Nonetheless, risk capital issued was up by a third relative to the same quarter last year, as both catastrophe bonds issued were upsized considerably. The consensus estimate for the entire year remains USD3 billion to USD4 billion, implying a strong fourth quarter for primary issuance.
David Priebe, Chairman of Global Client Development
Contact
The role of capital markets in the (re)insurance industry was uncertain a year ago. The eruption of the financial catastrophe within weeks of last year’s Rendez-Vous caused credit markets to seize and wreaked havoc on equities. Access to capital not in the reinsurance system already effectively closed. Today, however, the situation is vastly different. Financial markets are thawing, and equity values are coming back. Investors are showing more confidence in insurance risks — both directly, through catastrophe bonds, and indirectly, via equity markets. Mergers and acquisitions (M&A) are gaining momentum, as well. We’ve pierced last year’s cloud of pessimism, and the opportunities ahead are quite clear.
GC Securities, a division of MMC Securities Corp.*
Contact
A strong first quarter has demonstrated that catastrophe bonds are still important tools for risk managers, treasurers, and CFOs. After five months of silence since the last issuance in mid-August 2008, three bonds closed in the first quarter of 2009 bringing USD575 million in fresh capital and confirmation that these instruments are still attractive investments, despite the ongoing the global financial catastrophe. Investor marketing for a fourth catastrophe bond issuance began in the first quarter but is expected close in the early part of the second quarter. Issuance levels are consistent with the first quarter of 2008, a year that seemed likely to be the second-busiest in the history of the catastrophe bond market until the financial crisis accelerated in the fourth quarter of last year.
