Secondary trading

Outstanding European wind bonds are becoming increasingly sought after on the secondary market, sources say, after investors snapped up recent new issues.

Swiss ILS manager Solidum Partners' $4.25mn private cat bond transaction listed on the secondary market in October, offering investors a short-dated bond with the promise of capital gain at maturity.

Bonds with short periods to run until maturity are trading strongly on the secondary market as investors seek cashflow from un-exposed paper, according to brokers.

Goldman Sachs' ILS secondary trading desk sourced an institutional investor to sell a portion of MultiCat Mexico's Class A notes in September. They were then snapped up as a true diversifying ILS asset.

The September launch of AIR Worldwide's new European wind model sparked a flurry of secondary trading in an otherwise quiet month, as traders tried to digest the impact of the latest version.

As (re)insurers and investors digest recent European windstorm risk model adjustments, a consensus appears to be forming that the outcome will be positive for the ILS market.

Cat bond returns have quickly regained pace after losing ground in June and July, the Swiss Re Global Cat Bond Return Index shows.

Reinsurance broker Willis and New York based Phoenix Capital are set to be the next firms to launch secondary ILS trading desks.

Secondary market trading has ground almost to a halt in recent weeks, as investors tried to digest a very US wind-heavy ILS issuance season.

Pricing on Avalon Re's loss-struck $135mn Class C notes almost doubled to 91 cents on the dollar on the back of last minute trading ahead of their final maturity in June.

UK regulator the Financial Services Authority (FSA) delivered a stern warning to the life settlements market about mis-selling risks to retail investors, while the American Council of Life Insurers (ACLI) has called for a ban on life settlement securitisation - raising concerns about the industry's growth and development.

The Chicago Mercantile Exchange (CME) and Insurance Futures Exchange Services (IFEX) are believed to be in talks with risk transformer vehicles to offer exchange-traded insurance derivatives in (re)insurance form.