The catastrophe bond market is weathering the effects of the global financial downturn while maintaining a strong issuance pipeline for the remainder of 2009, according to a briefing report by Guy Carpenter & Company, LLC, and GC Securities, a division of MMC Securities Corp. Entitled Cat Bond Update: First Quarter 2009, the report indicated that catastrophe bonds continued to be important tools for risk and capital managers, with three bonds coming to market in the first quarter of 2009, totaling $575 million in fresh capital. The study noted that the consensus estimate for total catastrophe bond issuance activity in 2009 stands at $3 billion, dependent on market conditions. The report further said that this figure would result in an 11.1 percent year-over-year increase in catastrophe bond limits outstanding, and would see 2009 supplanting 2008 as the third-busiest issuance year in the history of that market.

A separate report from Guy Carpenter on the April 1 renewal reinsurance activity, Rates Up on Tightening Capacity at U.S. April 1 Prop-Cat Renewal, stated that rates for national programs rose between 10 percent and 14 percent on a risk-adjusted basis. Risk-adjusted pricing was up 12 percent to 14 percent on average for residual markets.

By comparison, reinsurance rates increased 11 percent on average at the Jan. 1, 2009, renewal date. The report predicted that capital will continue to be constrained in 2009, with uncertainty in the financial markets likely to impair investment assets. As a result of concern about continued price increases, a number of Florida renewals are already underway. Decisions made during the legislative session and by the Florida Hurricane Catastrophe Fund trustees could have a profound impact on the market, according to the report.