2014 could be marked by innovation
Last year could be viewed as a pivotal year for the cat bond and sidecar markets but, partly in response to this, 2014 could well become a year marked by innovation in the traditional sector.
That is the view of senior executives Willis Capital Markets & Advisory (WCMA). In its ILS report, the Willis unit documents the reasons that 2013 was such an important year for these markets. A record 29 cat bonds were launched and total issuance of $7.1 billion was very close to the 2007 record of $7.2 billion.
On top of this, overall outstanding capacity at year-end reached $18 billion and has now grown at a compounded growth rate of 18 percent since 2000. The fourth quarter of 2013 saw $1.8 billion of non-life catastrophe bond capacity raised in seven deals, whereas the fourth quarter of 2012 saw $1.9 billion issued in seven deals.
“2013 may prove to be a pivotal year for the cat bond and sidecar markets,” said Bill Dubinsky, head of ILS at WCMA. “On the one hand, 2013 was a banner year for cat bonds, sidecars, and collateralized reinsurance with $7.1 billion in non-life cat bond issuance and considerable sidecar activity despite the softening market conditions.
“On the other hand, traditional reinsurers are reacting aggressively to maintain market share by launching preemptive quotes to defend previously unassailable positions on the programmes of favored clients.”
Tony Ursano, CEO of WCMA, said: “The reinsurance industry is in the midst of a gradual transformation as the inflows of third party capital continue to increase. We expect that 2014 will be marked by innovation, seeing new sponsors, new perils and new structures come to market in an effort to meet investors demand for risk.”
