LONDON Dec 7 The volume of catastrophe bonds
and other insurance-linked securities listed on the Bermuda
Stock Exchange has passed the $5 billion mark for the first time
after a bumper 2012, the BSX said on Friday.
Some $1.6 billion of insurance-linked securities (ILS) have
been listed on BSX so far this year, the exchange's chief
executive said, taking the overall listing volume to $5.3
billion from $3.7 billion at the start of the year.
"Bermuda is creating a 'cottage industry' for ILS," BSX
president and chief executive Greg Wojciechowski told Reuters,
referring to businesses set up in Bermuda specifically to
create, administer and execute ILS products, such as cat bonds.
ILS sales have grow rapidly this year as investors search
out assets that are insulated from mainstream financial and
The most common form of ILS are catastrophe bonds, which
offer investors a high yield in return for their promising to
cover some of the issuing insurer's losses from claims should a
specified natural catastrophe occur.
The BSX has been listing ILS since 2009, when the local
regulator introduced rules allowing the establishment of
"special purpose insurers," vehicles used to sell catastrophe
bonds on behalf of the ultimate issuer.
The exchange currently hosts 40 listed structures, with a
market capitalisation of $5.3 billion, Wojciechowski said,
including Blue Capital Global Reinsurance Fund, an ILS fund
recently set up by Bermudan reinsurer Montpelier Re.
Prices in the sector have been rising after a series of
costly natural disasters, including October's superstorm Sandy,
which are expected to push up reinsurance prices when policies
are renewed next year. That is likely to spur further issuance
in the sector, which effectively offers insurers another source
of reinsurance for peak risks when prices are high.
The publicly traded catastrophe bond market has a
capitalisation of about $16 billion.
Bermuda is one of the world's leading insurance hubs,
rivalling London and Zurich, with many insurers and reinsurers
choosing the island as their home base because of its friendly
tax and regulatory regime.
New cat bond issuance picked up strongly worldwide in the
final three months of 2011 after a mid-year lull, with many new
issues being increased well beyond their target size due to
pent-up investor demand.
Total issuance to date stands at $5.6 billion, close to the
$6 billion forecast for the whole year by reinsurers, brokers
and ILS funds.
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(Editing by Catherine Evans)