Guy Carpenter and MMC Securities Publish Fifth Annual Review of Catastrophe Bond Market.Momentum of 2004 and 2005 Storm Activity Carries Into 2006 NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Guy Carpenter Guy Carpenter was fictional character in the Australian soap opera Neighbours played by Andrew Williams from 1991 to 1992. Family Tree
LLC - Logical Link Control , the leading global risk and reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. specialist and part of the Marsh & McLennan Companies (NYSE NYSE See: New York Stock Exchange : MMC See MultiMediaCard and Microsoft Management Console. ), and MMC Securities Corp.*, an affiliate of Guy Carpenter, today announced the publication of The Catastrophe Bond catastrophe bond A debt security with a payoff tied to the relative severity of a natural disaster such as a hurricane or earthquake. Bondholders are paid with insurance premiums but may have to accept reduced principal repayment in the event the specified Market at Year-End 2006: Ripples Into Waves. The report, their fifth annual joint study of natural catastrophe bond transaction activity, trends and market dynamics, found that the market momentum resulting from the record storm activity of 2004 and 2005 continued into 2006, with activity across virtually all measurable dimensions surpassing previous records by a large margin. "When we looked at the catastrophe bond market one year ago, the effects of the record storm activity, led by Hurricane Katrina  Editing of this page by unregistered or newly registered users is currently disabled due to vandalism. , were
beginning to be felt, with record totals in risk capital issued and
total risk capital outstanding, as well as new highs in the number of
bonds placed and first-time sponsors," said Christopher McGhee,
head of Guy Carpenter's Investment Banking Specialty Practice and
Managing Director of MMC Securities. "In 2006, these initial
ripples grew into a massive wave of market activity. In nearly every
measurable way, 2006 was, by some distance, the most active year in the
history of the catastrophe bond market, principally driven by the 2004
and 2005 hurricane activity."
According to the report, in two years the total annual catastrophe bond issuance has more than tripled. Total issuance in 2006 stood at $4.69 billion, representing a 136 percent increase over the previous record of $1.99 billion in 2005, and a 311 percent increase over the $1.14 billion issued in 2004. A total of 15 sponsors completed 20 new transactions in 2006, representing a new high in transaction volume. In terms of total risk capital outstanding, the market also saw record growth, with more than $8.48 billion of bond principal outstanding at the end of 2006 - a 74 percent increase over the year-end 2005 total of $4.90 billion. "What this record catastrophe bond activity implies for the long term remains to be seen," said Mr. McGhee. "The explosive growth we saw in 2006 was driven by a number of factors working in tandem, including a tightening in capacity, increased costs in the traditional market and model changes. All of these trends resulted from the 2004 and 2005 storms. Given the relative lack of U.S. hurricane activity in 2006, it is unclear whether the market momentum will continue into 2007. What is clear, however, is that capital markets will continue to play an increasingly important role in risk transfer." Among the report's highlights: * Dramatic Increases in Securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. - There was a sizable increase in securitization activity in non-bond form in 2006, including vehicles such as sidecars and Industry Loss Warranties Industry Loss Warranties, often referred to as ILWs, are a type of reinsurance or derivative contract through which one party will purchase protection based on the total loss arising from an event to the entire insurance industry rather than their own losses. (ILWs), as sponsors sought new ways to transfer and manage catastrophe risk. * Expansion of the Catastrophe Bond Market's Risk Profile - Though Standard & Poor's BB rating (or equivalent) remains the industry standard, there was a notable increase in 2006 in the number of B-rated and unrated issuances. * New Non-Insurance Catastrophe Bond Issues - Two non-insurance entities, FONDEN, a facility created by the government of Mexico, and Dominion Resources, Inc., a U.S. based energy company, sponsored new catastrophe bonds in 2006. * New Risks Securitized securitized Of, related to, or being debt securities that are secured with assets. For example, mortgage purchase bonds are secured by mortgages that have been purchased with the bond issue's proceeds. - Four new risks - Australian typhoon typhoon: see hurricane. and earthquake and U.S. typhoon and hail - were securitized for the first time in 2006. In addition, Japanese typhoon risk was securitized for the first time since 2003. Priced at a notable discount to peak peril cat bonds, these issues allowed cat bond investors to geographically diversify their investment portfolios. Copies of the full report, The Catastrophe Bond Market at Year-End 2006: Ripples Into Waves, are available for download at www.guycarp.com. For printed copies, please contact Guy Carpenter at marketing@guycarp.com. Guy Carpenter & Company, LLC is the world's leading risk and reinsurance specialist and a part of the Marsh & McLennan Companies. Guy Carpenter creates and executes reinsurance and risk management solutions for clients worldwide through 2,600 professionals across the globe. The firm's full breadth of services includes 16 centers of excellence in Accident & Health, Agriculture, Alternative Risk Transfer, Environmental, General Casualty, Investment Banking*, Life & Annuity, Marine & Energy, Professional Liability, Program Manager Solutions, Property, Retrocessional, Structured Risk, Surety, Terror Risk, and Workers Compensation. In addition, Guy Carpenter's Instrat[R] unit utilizes industry-leading quantitative skills and modeling tools that optimize the reinsurance decision-making process and help make the firm's clients more successful. Guy Carpenter's website address is www.guycarp.com. *Securities or investments, as applicable, are offered in the (i) United States through MMC Securities Corp., a US registered broker-dealer and member NASD/SIPC, and (ii) European Union European Union (EU), name given since the ratification (Nov., 1993) of the Treaty of European Union, or Maastricht Treaty, to the European Community through MMC Securities Ltd., regulated by the Financial Services Authority The Financial Services Authority ("FSA") is an independent non-departmental public body and quasi-judicial body that regulates the financial services industry in the United Kingdom. Its main office is based in Canary Wharf, London, with another office in Edinburgh. for the conduct of investment business in the United Kingdom. Reinsurance products are placed through qualified affiliates of Guy Carpenter. MMC Securities Corp. and MMC Securities Ltd. are affiliates of Guy Carpenter. |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion