High cat bond issuance: another man's poison?


The rising popularity of cat bonds is beginning to concern some in the wider reinsurance market. Intelligent Insurer finds out why.

Cat bonds have proved popular with issuers and investors so far in 2012. A mid-year renewals report by Aon Benfield Securities noted that seven cat bonds closed during the second quarter of the year, attracting $2.095 billion of capital—up $600 million from the first quarter’s record of $1.493 billion.

Martin Bisping, head of non-life ILS at Swiss Re, agrees that the cat bond market has had an impressive start to 2012. “The first half of 2012 was the most active first two quarters for issuance since the record year in 2007,” he says.

There are several reasons for the product’s growing popularity with investors. One is the wider low-yield investment environment. As such, insurance can offer an attractive return for investors compared with other investments and one way to access the market is through instruments such as ILS.

Alternative risk transfer, catastrophe bonds, cat bonds

Intelligent Insurer