American insurers aim to raise at least $500 million (£325 million) through catastrophe bond sales this month in the hope of regaining lost capital from last years near-record disaster losses, market sources said today.
The much needed surge in demand comes at a good time for the industry, after an upward revision of U.S. hurricane loss probabilities dampened activity last year, Reuters reported.
Cat bond transactions currently under way include a planned $150 million (£97m) issue from U.S. health insurer Aetna Vitality Re, aimed at shielding the company from higher-than-projected medical claims, Reuters sited the sources as saying.
Hannover Re aims to raise the same amount to protect itself against Japanese earthquake risk, while U.S. health and property insurer Assurant is looking for a $100 (£65m) million buffer against hurricane claims.
Separately, Swiss Re plans to raise about $100 million (£65m) to cover potential claims stemming from European windstorms, U.S. hurricanes, and Californian earthquakes.
“We didn’t see one transaction in January last year, and now we have five already, which is very unusual,” one of the sources said.
“All the companies need to recapitalise, and I think that’s the main driver.”
Earthquakes in Japan and New Zealand teamed with floods in Australia and South East Asia made 2011 the second costliest year on record for insurers. The only thing that stopped it becoming the most expensive was the relatively low cover for the Japanese disaster.
Investors who buy catastrophe bonds receive returns that are largely insulated from general financial market developments, but run the risk of sever losses if a catastrophe occurs.
