Catastrophe Bonds: $4 Billion by June 30?

By Gary Kerney April 18, 2013

According to Artemis, Aon Benfield has forecast $4 billion in catastrophe bond issuance activity by the end of June. If that happens, 2013 will have become the most active first half in the history of the market. So far, 2007’s first half boasts the largest issuance, with more than $3.7 billion, thanks in large part to the $1.1 billion Merna Re transaction. Last year, sponsors raised approximately $3.6 billion by the end of June.

Note: all figures in $ millions Sources: PCS, Artemis, Guy Carpenter

A record-setting first quarter would be interesting also, given the slow start to the catastrophe bond market this year. While issuance levels approached $1 billion— a threshold crossed only twice in this market (2011 and 2012) — deal flow announced but not yet closed by March 31 brought total market activity to more than $1.8 billion. Two more transactions — one for the earthquake in Turkey and the other a new Pelican Re transaction — will bring the year-to-date total to $2 billion when they close. That would leave another $2 billion to close in the second quarter to reach $4 billion.

Catastrophe bond issuance activity has reached $2 billion for the first half of the year only six times since the market’s inception (with 2013 the sixth), and it has surpassed $3 billion only twice — with 2013 poised to become the third instance.

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Gary Kerney

Gary Kerney, one of the most prolific contributors to this blog, retired from Verisk in 2013. Mr. Kerney served as assistant vice president, Property Claim Services (PCS). Since joining PCS in 1981, he worked on catastrophe identification, loss estimating, and catastrophe response and mitigation.