Catastrophe Bond and Reinsurance Update

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.