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The cat bond momentum has been carried over to 2022



Market momentum for disaster bonds continued during the first quarter after last year’s record new issue.

More than $ 3 billion in coverage has been issued in the 144A cat bond sectors since the beginning of the year, says Philipp Kusche, New York-based global head of ILS and capital solutions for TigerRisk Partners Inc.

It follows the record $ 12.8 billion in new 202 issue. 144A catastrophe bonds, which account for most cat bond transactions, are regulated under Rule 144A of the Securities Act of 1933. According to Artemis, they are “typically the more liquid type of cat bond. business, as opposed to cat bond lite transactions and private cat bond business. “

Mr. Kusche said the cat bond pipeline is the busiest he has seen in the last 1

0 years.

“Predictions made at the end of last year for this year have come true, and the pace has actually exceeded expectations,” he said. “We probably see two to three transactions being announced each week.”

The transactions range from $ 50 million to $ 60 million up to $ 300 million to $ 400 million, he said.

Sanders Re III Ltd., Series 2022-1, of Allstate banknotes secured $ 550 million US multi-risk coverage through April 2026, according to information on the Bermuda Stock Exchange.

“Directionally, that’s what happened,” with momentum continuing for most of the first quarter, said Paul Schultz, Chicago-based CEO of Aon Securities, a unit within Aon PLC.

Towards the end of the first quarter, the cat bond market had to start navigating both inflation and current geopolitical events, he noted.

Although this uncertainty has not affected asset class performance, fund and investment allocators now have additional variables that affect their distributions. “What has happened globally has not affected performance but rather capacity and liquidity,” Schulz said.

There were 10 traditional 144A transactions and several private deals totaling about $ 3.5 billion in venture capital, according to Artemis.

The uncorrelated nature of 144A disaster bonds, which means they are largely unrestricted to general economic or market volatility, was particularly confirmed in the first quarter as other asset classes have seen significant volatility, Kusche said. “Investors value that non-correlation,” he said.

“Non-correlation is really the fundamental reason why investors continue to be interested,” Schultz said.

Reinsurer, said Mr. Kusche, has long been active in the cat bond market but seems to have increased its participation recently to meet capacity needs, especially in the traditional retrocessional market. Primary insurance companies, he said, represent a faster-growing group of new sponsors of disaster bonds.

“We are really seeing an increasing number of new primary insurance companies coming into the capital market,” he said.

The first quarter saw an active market from both primary insurers and reinsurance companies as well as government entities, Schultz said. “We’ve seen FEMA (Federal Emergency Management Agency) enter the market this year already,” he said.

Schultz added that the transition from maturing transactions to new business is still an important part of the market.

There was some “dislocation” in the retrocessional market at the January 1 renewals, which led to reinsurers being more interested in disaster bonds this year than in others, Schultz said.

“We saw some of it in the first quarter and will probably see it in the second quarter as well,” he said.


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