Catastrophe bond issuance neared pre-crisis highs in 2013 -report

LONDON Wed Jan 29, 2014 12:16pm EST

LONDON Jan 29 (Reuters) - Sales of catastrophe bonds, used by insurers as a way of selling on their exposure to natural disasters, are close to levels last seen before the financial crisis, new data shows.

A flood of capital from pension and hedge funds, drawn by 5-7 percent yields for many so-called "cat bonds" when more traditional assets pay rock bottom rates, has driven down prices and hurt profitability for reinsurers.

Figures from insurance broker Willis published on Wednesday show total issuance during 2013 reached $7.1 billion, close to the $7.2 billion record reached during 2007.

The competition from such alternative sources of capital - once the preserve of specialist money managers -is blamed for pushing reinsurance prices down by more than a fifth in the lucrative market for hurricane coverage in the United States.