Japan earthquake spurs cat bond market

The Mar. 11 Japan earthquake has triggered an increased demand for catastrophe bonds, with a record $1 billion being issued in 2011 Q1, according to Willis Group Holdings’ boutique investment unit.
This marks a dramatic increase from 2010 Q1’s issuance of $650 million, Willis Capital Markets & Advisory said in its report, The Market Digests a Major Catastrophe Event.
The full impact of the Japan earthquake on pricing for new cat bond issues remains unclear, but Willis expects some upwards pressure on risk premium levels for Japan earthquake risks going forward.
“Significant recent loss activity in the traditional reinsurance market has created an opportunity for cat bond investors,” Willis said.
“The ability of the market to provide steady or expanded multi-year capacity at consistent risk spreads could stimulate new issuance and help to grow the market.”