The Money Man Behind Rick Santorum: Who Is Foster S. Friess?
Savings Experiment: Snow Removal
Merna Re, the largest catastrophe bond of all time, is set to mature in June, and State Farm is already putting together its replacement, the creatively named Merna Re II. The successor, planned for issuance in April, is said to be for $400 million in risk capital, though investor demand could push it as high as $700 million. This still pales in comparison to the $1.2 billion that the original brought in the door.
If State Farm is able to stimulate demand for Merna Re II, which would protect the company from non-California earthquake risk in the U.S., it will be third cat bond to come to market in 2010, which is expected to be a strong year for this form of risk transfer. The cat bond market fell silent after the near-collapse of American International Group (AIG) in September 2008 but was still the third busiest in terms of capital issued in the history of the cat bond market. Heading into 2009, prospects for the cat bond space seemed uncertain, but a robust fourth quarter eventually resulted in a year-over-year increase, driven mostly by repeat issuers.
Nonetheless, the market still hasn't come close to matching the $7 billion in risk capital secured via cat bonds in 2007, the top year for this form of insurance and reinsurance risk transfer. Of that $7 billion, State Farm's Merna Re accounted for approximately 17%. If there's a year that could rival 2007, though, 2010 may be it.
Analysts are forecasting an issuance year of above $5 billion, and some as high as $7 billion have been bandied about. In addition to the cat bond market recovery in 2009, issuance is likely to be buoyed by the maturation of three-year bonds issued in the record-setting market of 2007. Essentially, the record year is poised to revisit (or at least approach) itself simply through the cycle of bond maturities.
In addition to State Farm's cat bond, Swiss Re (SWCEY) has a new cat bond, Successor X Ltd., in the works, which would provide three years of protection against U.S. hurricane and European windstorm risks. Earlier this year, Hartford Financial Services Group (HIG) issued a $180 million cat bond to lay off U.S. hurricane risk.
The first quarter is relatively quiet for the cat bond market, but Q2 is usually active. With a new Merna bond in the pipeline, this is particularly true.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
