The catastrophe reinsurance market may be on the cusp of a strategic shift, with third party capital providers set to take on increasing amounts of peak catastrophe risk in the future, according to Willis Capital Markets & Advisory (WCMA), part of global insurance broker, Willis Group Holdings (NYSE: WSH).
The latest Insurance-Linked Securities (ILS) Market Update from WCMA, ‘Strong Momentum Continues into 2012 Hurricane Season’, reports that private unlisted vehicles, along with the growing specialist independent catastrophe risk funds, will take an increasing share of the catastrophe risk market in collateralized form over the medium term.
WCMA reports that there were seven new catastrophe bonds totalling $2.1 billion issued in the second quarter of 2012, compared with four deals worth $600 million in the same period a year earlier. The stand-out transaction of the quarter was Everglades Re for Florida Citizens. At $750 million, the two-year deal was the largest single-tranche cat bond ever placed.
According to the report, outstanding on risk-capacity increased by just over $700 million during the second quarter to $14 billion.
U.S. hurricane exposed transactions continue to dominate the non-life market, with 73 percent of outstanding cat bonds exposed to U.S. hurricane risk of some form.
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