April 2011/1

(Re)insurer opinion on preferred cat bond triggers has diverged and become more entrenched following losses on parametric bonds in the wake of the Japan earthquake.

Catastrophe losses have mounted quickly in the first quarter of 2011 but have not been enough to turn the softening reinsurance market, two of the major insurance brokers said in their reports on the 1 April renewals.

Cat bond sponsors and investors have just days to wait until they receive a final decision on whether $1.25bn of ILS capacity will be triggered by the 11 March quake that devastated north-eastern Japan.

Although Munich Re's Muteki deal became the first cat bond casualty of the 11 March Tohoku disaster, ratings agencies have taken action on a number of second event bonds now considered at risk for the US wind season.

Investment bank Credit Agricole has completed a $350mn, 10-year structured letter of credit deal providing MetLife with capital relief on its life insurance reserves.

Munich Re placed $100mn of US and European wind cover in the cat bond market last month just days after the 11 March Japanese earthquake and tsunami.

Cat bond values suffered their worst decline since the 2008 financial crisis in March as investors assessed losses after the Japanese earthquake.

Cat bond traders expressed satisfaction with secondary trading liquidity in the immediate aftermath of the 11 March Japan earthquake, with many spying yield opportunities in distressed bond prices.

The market is receptive to a repeat of Goldman Sachs' innovative 2010 health insurance deal Vitality Re, Trading Risk understands.

After months of waiting, the (re)insurance industry received the final expected loss numbers from modelling firm Risk Management Solutions' (RMS) revised US wind model in March.

Serial (re)insurance entrepreneur Don Kramer is talking to institutional investors about opportunities in the insurance-linked capital markets sector, Trading Risk can reveal.

A crushing Q1 catastrophe loss toll and sweeping US wind model changes have spooked the cat (re)insurance sector ahead of the North Atlantic hurricane season, fuelling talk of contingent capital and sidecar solutions to ease capital concerns.