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Cat bond issuance decreases in soft market


October 16, 2008   by Canadian Underwriter


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The issuance of catastrophe bonds has decreased to US$2.73 billion in the first nine months of 2008, compared to US$5.38 billion in the same period of 2007, BestWire reported.
The dip can primarily be attributed to the softening of the reinsurance market, Emmanuel Modu, managing director and global head of structured finance of A.M. Best, said at the company’s Preview & Review Europe in London.
He added he does not expect the 2008 total to surpass the figure of US$7.33 billion in 2007, BestWire reported.
Barriers to future growth in capital markets business in relation to property/casualty insurance include the upheaval in the credit market, and the likely negative effects of very low sidecar activity, he said. He also predicted an increase in the number of catastrophe derivatives in the market, BestWire reported.
Modu noted an increased interest by rating agencies and regulators in the integrity of the data they are seeing. Ratings agencies, he said, are now “much more sensitive to the investment guidelines in collateral accounts of catastrophe bonds.”


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