Investor demand continues to outstrip new issuance
With new sponsors entering the market each month, and some of the largest bonds on record reaching the market, it’s unsurprising that activity in the first half of 2014 is above expected levels.
In April four new bonds were issued: a €190 million ($259 million) European windstorm bond by Generali; a $450 million deal by Everest Re covering to North American wind and earthquake; and two tranches of coverage providing US windstorm coverage to Heritage Property and Casualty Insurance, worth $50 million and $150 million, respectively.
“We’ve certainly seen a continuation of strong issuance this season,” says Paul Schultz, CEO at Aon Benfield Securities. “While we expect the first half of every year to be active, the activity in the last four to six weeks has been even higher than usual.”
Schultz says that the increased activity is a result of more cedants starting to use the market—in the form of repeat cedants sometimes doing bigger deals as well as first time users of this form of catastrophe protection.
This appetite for risk protection by cedants is more than matched by investor appetite.
“Another obvious trend that’s dominating the market’s behaviour is pricing—or the cost of risk transfer capacity for clients, which continues to be attractive vis à vis the other markets,” Schultz says.
