Primary insurers issued majority of cat bonds in ’09: BestWeek

$3.4 billion of risk capital was issued through 18 cat bonds in 2009, marking a 25% increase in risk capital over 2008, and making 2009 the busiest year for new cat bonds since 2007.
It also made 2009 the third-largest ever in terms of total capital issued, reported BestWeek.
Total cat bond risk principal outstanding grew to $12.2 billion at year-end 2009, up slightly from $12 billion at year-end 2008.
More than 60% of the issuers in 2009 were primary companies, as opposed to reinsurers, which are more traditionally the sponsors of cat bonds, Chi Hum, head of distribution for GC Securities, told BestWeek.
“Primary companies are integrating cat bonds into their reinsurance purchase, so that going forward it will be more critical to be able to optimize the cat bond layer within the context of the entire program,” BestWeek quoted Hum.
Primary writers like cat bonds because they are getting fully collaterized reinsurance, often with a multi-year contract. In addition, depending on the trigger, a cat bond can result in a faster payment than traditional reinsurance, Hum said.