News review | 28 October 2013

GalileoGalileo Re, the catastrophe bond launched last week by (re)insurer Catlin, has increased in size to $300m. This represents growth of over 70% for the bond that was initially planned to be $175m. The Galileo Re Ltd catastrophe bond covers Catlin on an annual aggregate and industry loss basis for U.S. named storms, U.S. earthquakes, Canada earthquakes and European windstorm risks. Galileo Re Ltd is set to complete offering $300m of Series 2013-1 Class A notes at a final pricing of 7.4%.

AlphaCat, the third-party capital management segment of (re)insurer Validus Holdings, has grown dramatically this year, according to the Bermudian firm’s Q3 report. AlphaCat’s gross written premium has increased to $146.8m of gross premiums, compared to just $21.6 for the same period a year earlier. For the third-quarter, gross written premiums were $3.5m, up again on the $2.9m written in the third quarter of 2012. Underwriting income for the segment was $58.8m for the first nine-months of 2013, and $11.9m for Q3 of 2013. This compares to $4.9m and $2.8m a year ago. AlphaCat manages over $200m in third-party capital as well as managing sidecars, including PACRe Ltd, a joint venture with the Paulson & Co hedge fund.

Bermudian reinsurer, Everest Re, is on course to meet its targets for sidecar Logan Re by the end of the year. The firm launched Logan Re with the aim of raising $250m of third-party capital by the end of 2013. The firm has said it expects to hit the initial fund-raising target by the end of this year. Dominic Adesso, President of Everest Re, said; “While still relatively small, we are expecting the additional capital raised from Mt. Logan to meet, or possibly even exceed, our goal for the year-end.”

The cat bond market reached a new record size of $17.9bn during the third quarter of 2013, according to a quarterly report by Munich Re. The cat bond market saw a total issuance volume of $1.45bn during the third quarter of 2013, outpacing maturities of $346m. With issuances already exceeding maturities during the first and second quarter, the convergence area has continued to grow. It is now at a record size of $17.9bn in terms of outstanding capacity, as compared to $15.6bn and $12.8bn in the years 2012 and 2011, respectively. Munich Re said that many transactions in Q3 2013 were priced at the lower end or even below initial price guidance, as initial price expectations were once again undercut by competition for investments among ILS funds. This pricing squeeze was further accompanied by a total upsizing of 56% across all non-life transactions as many sponsors took advantage of current terms and increased the capacity purchased from capital markets.

The Chairman and CEO of W.R. Berkley has predicted that some of the sources of alternative capital coming into the reinsurance market may get their fingers burnt. William Berkley said he expects such capital providers will seek to expand their focus outside of the typical, well-modelled ILS perils and thus increase their risk profiles. He said: “Securitisation of non-tail risks is having an impact on cat business and large property risks. There are a lot of people who have investment portfolios and are looking for non-related risk profiles; therefore, you’re seeing an increase in cat bonds and other kinds of behaviors. That’s going to continue to impact back on the business.”

Broker Willis Re says Europe is a Reinsurance Buyer’s Market, with Loss Free Rates likely down 5-10% at 1 January 2014 Renewals. Speaking in Baden Baden Tony Melia, CEO of Willis Re International, said that increased capacity, competition and changing market dynamics have created a buyer’s market for European cedants. These market conditions, coupled with changing reinsurance buying patterns, are driving reinsurers to offer more flexibility and tailored solutions to European clients.

The Canterbury District Health Board (CDHB) in New Zealand has settled its multimillion-dollar earthquake-related insurance claim, but there is still a significant shortfall for its quake repairs bill. In one of the largest Canterbury quake claims, the board will receive the full amount available under its policy - NZ$320m. Chairman Bruce Matheson said the board was delighted to have received the full amount, but the payout was ''not going to allow us to fix everything''. Since the September 2010 quake, the CDHB has sustained damage to more than 200 buildings and 12,000 out of 16,000 rooms. The board identified more than NZ$500m of quake-related repairs to its buildings and infrastructure, Matheson said.

The Insurance Council of Australia (ICA) reported that insured losses from the bushfires sweeping parts of New South Wales are AUS$93m to date. As of 21 October, 885 claims had been lodged with insurers, with more expected. ICA CEO Rob Whelan said insurance assessors were starting to review claims, and would continue to assess the damage once emergency services allowed them access to affected areas.

Posted: Monday, October 28th, 2013