Another Active Quarter for Insurance-Linked Securities

NU Online News Service, Feb. 10, 2:57 p.m. EST

Insurance-linked securities had another active fourth quarter, but did not break any placement records for 2011 according to a report from Willis Group Holdings.

In its “ILS Market Update” Willis says 2011 fourth-quarter catastrophe bond issuance came in at close to $2 billion compared to the previous year’s $2.02 billion.

For the year, total catastrophe-bond issuance was $4.3 billion, compared to 2010’s total of $4.8 billion.

Willis says the drop compared to 2010 was driven by the uncertainties caused by loss activity in the early part of the year and the significant changes made in the RMS catastrophe model version 11 forU.S.hurricane risk.

Bill Dubinsky, head of insurance-linked securities at Willis Capital Markets and Advisory, a part of Willis Group Holdings, says in a statement, “2011 finished as could be expected, with the quarter’s performance proving the strongest of the year. While we are seeing a temporary slowing of net-capital inflows due to the wider economic climate, particularly in the Eurozone, we expect the growth in investor capital to continue. Combined with the potential for innovation in the market, taking in new perils, structures and different forms of risk-taking, in 2012 we may see non-life issuance break the $5 billion mark for the first time since 2007.”

There were a total of nine issues in the fourth quarter, dominated byU.S.hurricane risks. Willis says that 68 percent of outstanding bond risk is exposed to hurricane risk in some form.

Chartis had the largest issue in the quarter: $575 million from its Compass Re catastrophe-bond vehicle.

Willis notes that Chartis has $1.45 billion of bonds outstanding, or 11 percent of the total market. The Compass Re program protects againstU.S.hurricanes and earthquakes for three years.

The quarter also saw the establishment of Golden State Re sponsored by the California State Compensation Insurance Fund. This $200 million tranche provides three years protection resulting fromU.S.earthquakes against workers’ compensation claims. Willis notes this is the first catastrophe bond designed to exclusively cover a portfolio of workers’ comp exposures.

Comments

Resource Center

View All »

Complimentary Case Study: Helping achieve your financial goals By:...

Find out how a Special Investigation Union used TLOxp to save the company money and...

Do Your Clients Hold The Right CDL License?

Learn about the various classes of CDL Licenses and the industries that are impacted by...

Integrated Content & Communications: A Key Business Issue For Insurers

Insurers are renewing their focus on top line growth, and many are learning that growth...

High Risk Insurance Coverage in the E&S Market

Experts discuss market conditions, trends and projected growth in a rapidly changing niche.

Top E-Signature Security Requirements

This white paper covers the most important security features to look for when evaluating e-signatures...

EPLI Programs Crafted Just For Your Clients

Bring us your restaurant clients, associations and other groups and we’ll help you win more...

Is It Time To Step Up And Own An Agency?

Download this eBook for insight on how to determine if owning an agency is right...

Claims - The Good The Bad And The Ugly

Fraudulent claims cost the industry and the public thousands of dollars in losses. This article...

Leveraging BI for Improved Claims Performance and Results

If claims organizations do not avail themselves of the latest business intelligence (BI) tools, they...

Top 10 Legal Requirements for E-Signatures in Insurance

Want to make sure you’ve covered all your bases when adopting e-signatures? Learn how to...

Risk Management Report eNewsletter

Identify problems involving emerging risks, reinsurance, and business interruption with help from Risk Management Report - FREE. Sign Up Now!

Advertisement. Closing in 15 seconds.