The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Capital Markets

Convergence Quarterly: Where insurance and the capital markets meet

The cat bond market has been given an overhaul and come back with a vengeance. But can the good times last?

This article appears courtesy of Reactions06 May 2009 If someone had said six months ago that catastrophe bond issuance at the end of April 2009 would exceed the level seen in the first four months of 2007 and 2008, few would have believed them.

The insurance-linked securities (ILS) markets dried up in the second half of last year, largely as a result of the collapse of investment bank Lehman Brothers, which was the total return swap (TRS) counterparty for several high-profile cat bonds.

The effects of Lehman’s downfall were two-fold. Some investors shied away from ILS for fear of further defaults. At the same time multi-strategy hedge funds began to sell their positions in the market to fund redemptions caused by the Lehman fiasco. This led a boom in the secondary market for ILS, but lowered demand for new issuances.

Now those secondary deals are gone, and the cat bond market has made a triumphant comeback at the start of 2009.

There were five issuances in the first quarter alone. By April 30, the number of issuances had risen to seven, with a combined value of $815m. And shortly afterwards, Assurant entered the cat bond market for the first time with its two-tranche cat bond Ibis Re, bringing total 2009 cat bond issuance to $965m.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree