September 2012 Bermuda Re/insurance
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Aon Benfield’s Insurance-Linked Securities Second Quarter Update 2012 revealed that catastrophe bond issuance for the period reached $2.1 billion as investors continued to deploy capital into the sector, reaching near-record levels.
The report said that the market retained strong momentum from the first quarter, when ILS issuance reached record levels, with $1.5 billion of deals brought to market and a total of seven transactions closed during the second quarter of 2012, featuring both new and repeat sponsors.
Aon Benfield said that issuance for the first half of 2012 stood at $3.6 billion, which was just short of the all-time high of $3.8 billion achieved during the same period in 2007. The pipeline for the remainder of 2012 remains strong, something we at the BSX are pleased to see, with healthy levels of capital inflows from both seasoned investors and newer entrants to the ILS sector across the market.
The reason for the interest is that ILS such as cat bonds have a low correlation to equities and good returns; over the five years ending in 2011, the Swiss Re Global Cat Bond Performance Index posted a return of 9.09 percent—excellent in the context of today’s market.
In Bermuda, we now have the infrastructure to deal with growing demand for the issuance and listing of cat bonds and are continuing to evolve to meet market needs. As the world’s third largest reinsurance market, home to 1,400 re/insurance companies with
“Aon Benfield said that issuance for the first half of 2012 stood at $3.6 billion, which was just short of the all-time high of $3.8 billion achieved during the same period in 2007.”
total assets of $442 billion, we see Bermuda as a natural place for establishing and listing ILS structures.
In fact, many of our re/insurance companies have issued cat bonds or set up special purpose vehicles such as sidecars, so companies, lawyers and advisors in Bermuda have an excellent track record of experience and knowledge in this area.
Due to a concerted effort on the part of Bermuda, we are now seeing an interest from beyond the Island in either setting up or listing catastrophe bonds from outside the jurisdiction—a development that is once again proving that Bermuda is setting the pace in the catastrophic risk transfer market.
Greg Wojciechowski is the president and CEO of the Bermuda Stock Exchange. He can be contacted at:
gwojo@bsx.com
Wells Fargo Insurance Trust team named ‘Global Best Bank for Insurance Trusts’
and captive programmes worldwide. The cost savings realised by our clients using the WF Trust in lieu of letters of credit (LOCs) is staggering.
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There are many benefits to using the Wells Fargo Trust in lieu of LOCs to collateralise such programmes. They include:
• Saving between 80 percent and 98 percent of LOC fees • Keeping corporate credit lines available • Retention of the interest income of assets held in trust • Retention of ownership of the assets in trust • Ease of set-up and renewal The trust concept is simple. Rather than posting a letter of
credit as collateral, our clients deposit cash or cash equivalents (the same cash that they would likely use to collateralise an
ver the past 13 years, the Wells Fargo ILS and Reinsurance Trust group has established billions of dollars of trusts used to collateralised ILS, reinsurance,
LOC) into a legal trust account where the depositor “owns” the money and the transformer (for ILS deals) or cedent (for reinsurance) is the beneficiary of the trust. From a regulatory and carrier perspective, this satisfies the collateral requirement.
The Wells Fargo ILS and Reinsurance Trust team has the well deserved reputation as the most knowledgeable and responsive trust group in the industry. So if you are posting LOCs for ILS, Reinsurance, or Captive programmes, or if you are finding your current trustee less than ideal, consider using the ILS or Reinsurance Trust, and please consider Wells Fargo as trustee.
For more information please contact Robert Quinn on: Tel: +1 203-293-4394 Email:
robert.g.quinn@wellsfargo.com Website:
www.wellsfargo.com/insurancetrust
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