Catastrophe bonds are seeing a surge in investor interest in the aftermath of Covid-19, with issuance expected to grow next year.

Mike Millette copy

Speaking during The ReInsurer’s virtual panel debate focused on the ILS market, Michael Millette, founder and managing partner at Hudson Structured Capital Management, said cat bonds were experiencing rising interest in part due to their performance during the ongoing pandemic.

“The bond space tends to be top layers and it tends to be named peril, so cat bonds were relatively less impacted by the potential for loss arising from coronavirus,” he said.

“The main impacts have been in collateralised reinsurance and especially collateralised retro, where you have all perils coverage.”

Philipp Kusche, global head of ILS and capital solutions at TigerRisk Capital Markets, said this dynamic had increased the attractiveness of the cat bond market to investors.

“Cat bonds have seen fewer loss impacts in the last few years and are seen as more robust with more liquidity than other ILS classes. Cat bonds is where we are seeing quite substantial interest from investors,” he said.

Paul Schultz, CEO at Aon Securities, said the pipeline for cat bonds for Q4 and beyond “looks extraordinarily strong”.

“We expect issuance to continue to grow into 2021. The relevance of the cat bond product is probably higher than some of the other products that comprise the ILS portfolio,” he said.

“Cat bonds have grown 5 or 6 points as a percentage of the overall ILS market over the last couple of years and we expect that to continue into 2021 as both cedants and investors gravitate more towards bond products.”

 

Watch The ReInsurer’s third virtual debate: “ILS market: resiliency, opportunity and capacity challenges”

Participants:

  • Judy Klugman, Head ILS Sales, Swiss Re Alternative Capital Partners
  • Philipp Kusche, Global Head of ILS and Capital Solutions, TigerRisk Partners
  • Michael Millette, Founder and Managing Partner, HSCM
  • Stephan Ruoff, Head of Schroder Secquaero
  • Paul Schultz, CEO, Aon Securities
  • Chris Munro, North American associate editor, The Insurer (Moderator)


View debate highlights here.