Catastrophe bond issuance reaches record levels: Willis

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November 7  |  Financial, News  |   Danielle Szeliga

Third-quarter catastrophe bond issuance, the largest in 15 years, is up sharply over last year, and outstanding capacity stands at a record, according to a report released Wednesday by Willis Group Holdings P.L.C.’s Willis Capital Markets & Advisory unit.

Third-quarter 2013 catastrophe bond issuance was about three times higher than the five-year average and was the highest on record since 1998, according to Willis’ “Insurance Linked Securities’ (ILS) Report.”

There were seven bonds issued totaling $1.45 billion in nonlife capacity during third quarter 2013 compared with just $500 million of capacity issued through three bonds during third quarter 2012, the report said.

With $5.3 billion in capacity issued through the first nine months of the year, 2013 is set to easily surpass the $5.9 billion of capacity issued in 2012 and indeed may see the highest total ever, according to the report.

“As we move into the year’s final quarter, a Q4 issuance level similar to that of recent years will see the market record its largest ever issuance year, surpassing the 2007 record ($7.2 billion),” the report said.

The $17.3 billion in outstanding capacity is at an all-time high, according to Willis Capital Markets & Advisory, and has grown in each of the past five years.

“Some investors are encouraging more catastrophe bond issuance so that they can continue to fulfill mandates for liquid investments,” said Bill Dubinsky, head of ILS at Willis Capital Markets & Advisory in a statement.

“Other investors are chasing the illiquidity in collateralized reinsurance as a mechanism to protect themselves from the ruthless price pressure in a well run syndication process,” Mr. Dubinsky said.

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