CAT BONDS TREAD WATER AS SIDECARS SHOW RESURGENCE

There were 24 separate catastrophe bond transactions in the year to June 30 2011, totalling $4.4bn, reports Aon Benfield in its latest report on the insurance linked securities (ILS) sector. There were slightly fewer transactions in the previous 12 months, although the 21 that did take place generated a higher volume – $4.7bn. The market showed a greater keenness in 2011 on sidecars. Aon Benfield Securities president Paul Schulz noted that "consistency in issuance, including strong participation from repeat issuers, demonstrated the continued reliance of both sponsors and investors on capital markets capacity. Renewed interest in sidecar structures also demonstrates the flexibility of the ILS market to provide fresh capital following market losses". US hurricane risk continues to dominate the cat bond market, accounting for 46% of natural catastrophe issuance. US earthquake risk made up 15%, while European windstorm made up 19%. The volume of cat bonds outstanding as of June 30 was $11.5bn, with most of the bonds issued in 2007 – the peak year for issuance – now having matured. The three-year "lag" effect will help the total issuance to grow in 2012, as 2009 was a year of relatively few new issues.