Nearly $2B in Cat Bonds Closed During Another Busy Quarter

NU Online News Service, Jan. 17, 1:37 p.m. EST

The fourth quarter proved to be another active one for catastrophe bond transactions despite the size of the transactions slightly being off from the previous year.

In its report “Insurance-Linked Securities, Fourth Quarter Update 2011,” Aon Benfield says 2011 “ended strong with the closing of nearly $2 billion of new deals for nine sponsors.”

The figure represents 43 percent of the year's activity, the report notes.

“Strong investor demand for diversifying risk was witnessed in the fourth quarter of 2011, which facilitated a total upsizing of $800 million across the insurance linked securities transactions brought to market,” Paul Schultz, president of Aon Benfield Securities says in a statement.

While the fourth quarter activity is in line with the previous two years, the total amount of catastrophe bonds issued was about 15 percent less in 2011 than in 2010.

The total in 2010 was $5.3 billion, with fourth quarter generating $2.4 billion in catastrophe bond issuance. In 2011, the total was $4.6 billion, with close to $2 billion in the fourth quarter.

Aon Benfield notes that in line with 2009 and 2010 fourth quarter activity, the fourth quarter 2011 transactions primarily covered hurricane risks in the United States, totaling $1.5 billion.

The most active sponsor was National Union Fire Insurance Co. of Pittsburgh, which closed three tranches totaling $575 million.