Peter Zaffino, President and CEO
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Last year, a financial catastrophe shook major market centers around the world. Several prominent, global banks have all but disappeared. Yet, insurers and reinsurers, in general, have persevered. We have been able to absorb the losses in capital triggered by both economic conditions and the second-busiest catastrophe year in at least four decades. But, these developments have changed our business, from perspective to transaction. This is particularly evident in the market for insurance-linked securities (ILS).*

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GC Securities, a division of MMC Securities Corp.*
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Shelf offerings have become increasingly common in the catastrophe bond market. First introduced in 2002, this concept of creating a platform for multiple note issuances evolved from the medium-term note programs developed for corporate debt issuers in the capital markets. The advantages of shelf offerings are substantial when compared to the serial approach to catastrophe bond issuance which preceded this innovation. Issuers appear to value the structure, as 100 percent of the catastrophe bonds issued in 2008 used the shelf offering structure. This unanimity among issuers is a profound endorsement of shelf offerings.

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By David Priebe, Chairman, Global Client Development
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The capital models for (re)insurance risks are evolving. Over the past 15 years, alternative sources of capital have become increasingly important, particularly in the capital-constrained environments that follow major catastrophe events. As expected, capital market vehicles such as catastrophe bonds and sidecars have brought additional capacity to risk-bearers when they need it most, alleviating price pressure as a result.*

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After a decade of use and refinement, catastrophe bonds (“cat bonds”) have matured substantially. They have become integrated into modern catastrophe risk management practices. Issuance activity rates accelerated dramatically, even in the wake of two consecutive annual new issuance records. With rates softening for traditional reinsurance capacity, a third consecutive record-setting year characterized the cat bond market in 2007.

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