Catastrophe Bond Update: Second Quarter 2010 – Activity Surges…Reflecting Favorable Issuance Conditions and Strong Investor Demand: Index to articles
Catastrophe Bond Update: Second Quarter 2010 - Activity Surges…Reflecting Favorable Issuance Conditions and Strong Investor Demand: Part I: In the second quarter of 2010, eight catastrophe bond transactions were completed, and USD2.05 billion of risk capital was issued, making it the second most active second quarter on record. USD1.70 billion of this total (and all but one transaction) included exposure to U.S. wind as sponsors and investors focused on this peril, leading into what is expected to be an active North Atlantic hurricane season.
Catastrophe Bond Update: Second Quarter 2010 - Activity Surges…Reflecting Favorable Issuance Conditions and Strong Investor Demand: Part II: Execution Study and Further Commentary on Second Quarter Market Dynamics: During the fourth quarter of 2009, the first quarter of 2010 and the beginning of the second quarter of 2010, transactions had generally been reaching issuance targets or upsizing and pricing at or below the midpoint of their initial spread guidance range. This trend moderated and in some cases reversed itself during the second quarter of 2010 as investors, though flush with cash due to inflows and maturities of existing positions, were disinclined to accept additional U.S. wind risk. Because nearly all of the new issuance available during the second quarter included U.S. wind exposure, transactions coming to market in late April or May faced more challenging market conditions which in some cases resulted in concessions being made by protection buyers with respect to deal size and spread levels.
Catastrophe Bond Update: Second Quarter 2010 - Activity Surges…Reflecting Favorable Issuance Conditions and Strong Investor Demand: Part III: Second Quarter 2010 versus First Quarter 2010 and Second Quarter 2009: Second quarter of 2010 issuance activity increased relative to first quarter of 2010, both in terms of transaction count (eight versus six) and risk capital issued (USD2.05 billion versus USD808 million). Median transaction size was USD245.0 million in the second quarter of 2010 relative to USD125.0 million in the second quarter of 2009. Increased transaction size is due primarily to market conditions. In the first six months of 2009 spreads were at or near their all time widest levels due to lingering credit crisis concerns and expectations of an active 2009 North Atlantic hurricane season. Spread levels have tightened 20 to 30-percent year over year, due to increased systemic stability, net new inflows into catastrophe bond asset managers, maturities of outstanding bonds, and competitive pressure from the traditional reinsurance market that continues to tighten. At lower spread levels, sponsors that had reduced or even postponed their catastrophe bond transaction during the second quarter of 2009 elected to target increased transaction sizes during the second quarter of 2010.
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• Cory Anger, Managing Director**
• Chi Hum, Managing Director**
• Hong Guo, Managing Director**
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• Brad Livingston, Analyst**
ILW market commentary provided by
• Barry Law, Managing Director (Guy Carpenter London)
• Larry Rothstein, Vice President (Guy Carpenter London)
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