Cat bonds issuance expected to pick up

Issuance of catastrophe bonds (cat bonds) is expected to rebound in the early part of this year after a quiet fourth quarter in 2008, according to New York-based reinsurance specialist Guy Carpenter.

There were 13 issuances last year, all but two of which occurred in the first half of 2008, totalling $2.7 billion. After a record $7 billion issuance in 2007, the levels in 2008 fell 62% and 52% in terms of risk capital and number of transactions, respectively.

Guy Carpenter also revealed that, after the events of mid-September 2008, including the collapse of Lehman Brothers, several firms that were planning catastrophe bond issuances for the fourth quarter chose to defer them to the first quarter of 2009, and there have not been any new cat bonds sold since.

David Priebe, chairman of global client development at Guy Carpenter, said: "Cat bond issuance activity is likely to eventually rebound as conditions improve, and as an asset class, cat bonds should offer improved utility both for sponsors and investors."

One of the first of the new issuances this year is likely to be a $200 million cat bond, called Atlas Reinsurance V, for Paris-based reinsurer Scor to protect against US windstorms and earthquakes, according to a pre-sale report by ratings agency Standard and Poor's. This gave detailed preliminary ratings of B+ for a $50 million tranche, B+ for a $100 million tranche, and B for a third $50 million tranche.

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