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The catastrophe bond market is still running strong. This alternative to reinsurance, in which insurers can package up their risk and sell it to investors, may be a small part of the market, but carriers are clearly committing to it.
Swiss Re (SWCEY) and Scor (SCRYY) both have launched cat bonds, for $150 million and $75 million, respectively. This brings the fourth quarter issuance total to $840 million and the 2009 year-to-date tally to just over $2.6 billion, based on information from Artemis.bm and Guy Carpenter's GC Capital Ideas.
The catastrophe bond market grew aggressively through 2007, when it reached $7 billion in new issuances. Last year, however, activity plummeted, as the financial crisis and its impact on credit markets brought the sector to a screeching halt before it could take advantage of what is typically a busy fourth quarter. Even with only seven months of activity, 2008 was able to register as one of the busiest cat bond years in the history of the market.
Forecasts for the cat bond market this year are for at least $3 billion in new capital for the insurance and reinsurance industry. December tends to be a hot month for these financial instruments, so the current level is well within striking distance. Investors, it seems, are eager to trade on disaster.
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