Guy Carpenter & Company (GC), have found that market pressures at 1 July renewals continued to drive price decreases across virtually all geographies and lines of business, many in the double digit range.
As loss activity remained minimal, reinsurers added to surplus capacity and additional capital continued to come into the market via alternative sources. According to the report by GC, the growth of alternative capital and expansion of its range of offerings continues to impact the marketplace in a meaningful way.
Catastrophe bond issuance was extremely strong through the first half of 2014, with a record-setting half-year issuance of $5.7 billion of 144A property catastrophe bonds.
Total risk capital outstanding now sits at an all-time high of $20.8 billion (excluding private placements). Even with no further activity for the remainder of the year, 2014 would still register as the fourth largest year in terms of new issuance.
Catastrophe bond price decreases and oversubscription of placements also continued in 2014. As a result, a number of deals were upsized and priced significantly below their initial range during the first six months of the year, leading to a record setting pace in issuance.
Price adjustments moderated somewhat towards the end of Q2, especially for Florida hurricane exposed placements, although the majority of deals in this period still priced comfortably within their initial guidance.
David Priebe, vice chairman of GC, commented: “With an abundance of alternative capital, catastrophe bond pricing continues to decline.”
“In addition, greater flexibility in the market has facilitated first-time achievements in 2014, including a European windstorm bond utilising an indemnity based trigger and the first ever Japanese yen denominated bond.”
Priebe continued: “Alternative capital is also extending its market impact through increased interest in non-catastrophe lines of business, including entities specifically focused on writing more stable business but with a more aggressive investment strategy.”
