April 2014/1

Softening traditional reinsurance rates kept the California Earthquake Authority (CEA) out of the cat bond market in 2013, the company's chief financial officer Tim Richison said at the Trading Risk Sifma roundtable.

Nephila syndicate posts debut profit; Catco launches Aquilo fund with $110mn; Investors back life (re)insurers

Alternatives investment adviser K2 Advisors has been quietly offering a fund-of-funds for the ILS sector, Trading Risk understands, while ILS Advisers has also launched such a vehicle in the past month.

ILS fund managers' first quarter returns this year are lagging behind those in the same period of 2013 following a year of market softening, according to results from a group of seven cat bonds tracked by Trading Risk.

ILS rates-on-line (RoLs) took their sharpest drop in the first quarter since the same period of last year, according to the Willis Capital Markets & Advisory RoL index.

Japanese earthquake industry loss warranty (ILW) covers have softened by 25 percent year-on-year at the $10bn trigger level, according to pricing sheets obtained by Trading Risk.

The largest price rises on the secondary cat bond market have been seen at both the very low and very high risk ends of the ILS spectrum over the past month, traders told Trading Risk.

American Strategic's $200mn Gator Re is understood to be the first cat bond that provides annual aggregate reinsurance cover without having franchise deductibles in place.

Several new sponsors came to the cat bond market in the first quarter, with a further surge in early April.

Several ILS fund managers considered listing new closed-ended vehicles in the past few months but plans for further additions have been put on hold as investors are wary of the current yield environment, Trading Risk understands.

Capital market participants are ramping up efforts to participate in the energy insurance market through parametric deals such as Gulf of Mexico (GoM) "cat in a box" wind products, Trading Risk understands.

Earlier this year we covered a speech from Scor CEO Denis Kessler, in which he suggested that the ILS market had been fuelled by ultra-low interest rates - and that the end of quantitative easing in the US would lessen the sector's appeal.