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Cat bond issuance totals nearly US$3 billion in Q2: Aon


July 15, 2015   by Canadian Underwriter


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Eight of the 10 catastrophe bonds issued during the second quarter of 2015 included coverage for United States hurricane and one of those used a parametric index trigger, while Italian insurer UnipolSai Assicurazioni S.p.A entered the market with a 200-million-euro issuance covering European earthquake, Aon Securities Inc. reported Wednesday.

The total cat bond issuance in Q2 was US$2.962 billion Total cat bond issuance in Q2 was US$2.962 billion, reported Chicago-based Aon Securities, the investment banking unit of Aon plc, in its Insurance-Linked Securities Second Quarter 2015 Update.

Of the eight bonds whose covered perils included U.S. hurricane, six “provide regional cover across territories including Florida, Louisiana, Texas, Massachusetts and the Northeast,” Aon Securities stated.

Total cat bond issuance outstanding – including life and health – stood at US$23.47 billion as of June 30. The total value of the cat bond transactions that closed during Q2 was US$2.962 billion.

That included a 200-million-euro issuance by Azzurro Re I Ltd. on behalf of Bologna, Italy-based UnipolSai Assicurazioni, which “provides dedicated coverage for Europe earthquake and is the first catastrophe bond to do so with an indemnity trigger,” Aon Securities stated in the update. In calculating total issuance in U.S. currency, Aon converted the UnipolSai issuance figure using the exchange rate of US$1.12 to the euro as of June 17.

During Q2, Alamo Re Ltd. made two issuances, with a total value of US$700 million, on behalf of Texas Windstorm Insurance Association, covering Texas hurricane. Also in the three months ending June 30, Long Point Re III Ltd. issued US$300 million in cat bonds on behalf of The Travelers Indemnity Company, covering northeast hurricane, earthquake, severe thunderstorm and winter storm. This was Travelers’ fifth cat bond transaction, Aon Securities reported.

“Unlike the prior transactions which all covered Northeast tropical cyclone, this is the first to provide multi-peril coverage including earthquake, severe thunderstorm and winter storm events in addition to tropical cyclone,” Aon Securities stated of Travelers’ issuances.

Another US$300 million issuance during Q2 was made by Compass Re II Ltd. on behalf of American International Group Inc., covering U.S. hurricane. That transaction “utilizes a more unique parametric index trigger based on the reported maximum sustained wind speed and radius of windstorms crossing the boundary points of the covered area over a six-month term,” Aon Securities said.

Also during Q2, Citrus Re Ltd. made three issuances – with total value of US$282.5 million – on behalf of Heritage Property & Casualty Insurance Company, while Cranberry Rd Ltd. issued US$300 million in cat bonds on behalf of Massachusetts Property Insurance Underwriting Association.

Other issuances in Q2 included:

– US$300 million, issued by Everglades Re II Ltd. on behalf of Citizens Property Insurance Corp., covering Florida hurricane;

-Two issuances totalling US$150 million by Residential Reinsurance 2015 Ltd. on behalf of United Services Automobile Association, covering U.S. hurricane, earthquake, severe thunderstorm, wildfire, volcanic eruption and meteorite impact; and

-US$100 million issued by Pelican III Re Ltd. on behalf of Louisiana Citizens Property Insurance Corp., covering Louisiana hurricane.

Total cat bond issuance for the first half of 2015 was US$4.66 billion, down from US$5.9 billion during the same period in 2014.


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