NU Online News Service, May 14, 2:35 p.m.EDT

Catastrophe bond activity reached record levels in the firstquarter of this year, exceeding last year's placements by more than$300 million, says a leading reinsurance broker.

Reinsurance broker Guy Carpenter, a subsidiary of Marsh &McLennan Companies, the parent company of insurance broker Marsh,issued a report saying that total globalcatastrophe bond placements reached $1.34 billion issuedthrough eight transactions.

The total exceeds last year's record of $1.02 billion for thesame period, the report says.

The report was assembled by GC Securities, a division of MMCSecurities Corp.

The report says total risk capital outstanding increased by morethan 5 percent from $12.14 billion to $12.77 billion.

Catastrophe bond redemptions came to about $711 million in thequarter.

The report also says that bond issuance was “significantly morediverse than the year before” primarily “in terms of types ofexposure, event structure and risk-return profile.”

“In the first quarter of this year, sponsors sought to lock incapital markets capacity for a diverse array of perils andstructures in a somewhat uncertain traditional market environment,”notes Cory Anger, Global Head of ILS Structuring, GC Securities ina statement. “Capital providers proved up to the task, althoughwith some upward pressure on pricing.”

Chi Hum, Global Head of ILS Distribution, GC Securities adds,“The level of issuance achieved in the first quarter demonstratesthat both protection sellers and buyers are seeing strong value inthe insurance-linked securities market. Record issuance combinedwith new perils, structures and investors illustrate the continuedgrowth and maturity of the catastrophe risk asset class.”

Among the insurers sponsoring bonds were Swiss Re and Assurantfor three year U.S. hurricane programs totaling close to $200million. Zenkyoren introduced a $300 million bond for Japanearthquake. The California Earthquake Authority sponsored a $150million bond. Munich Re secured a $75 million bond for U.S. andEuropean windstorm damage.

Most of the activity occurred in March, the report says, withhalf of the quarter's total transacted during this month. Theactivity was topped with “the long awaited return” of LibertyMutual with a $275 million bond for U.S. hurricane exposure.

Looking ahead, 2012 could be a record year, the report says,which would mean bond issuance in excess of $7 billion. However, GCSecurities is setting its sights at around $5.5 billion in issuancewith “significant potential” for more issuance depending uponmarket conditions.