December 2012/1

Longevity swap volumes in 2012 were touted to exceed or at least match the $7bn record set in 2011, but one year on just a handful of deals have closed, with the market dominated by reinsurers.

The industry loss warranty (ILW) market had a year of two halves in 2012, starting with strong trading amid a dislocated retro renewal at 1 January 2012, before volumes and prices fell dramatically at mid-year as indemnity capacity rebounded.

Collateralised capacity made its mark in this year's property catastrophe renewals as market commentators remarked on the success of convergence.

Throughout 2012 reinsurers have rushed to pick up new convergence talent and build out their third party funds management arms in response to growing investor interest in the sector.

ILS specialist hedge funds tracked on the Eurekahedge ILS Advisers Index delivered average returns of 5 percent for 2012 up to the end of November, well ahead of the -0.12 percent annual loss made in 2011.

This time last year the specialist ILS fund market was abuzz with talk of potential consolidation as a question mark hung over the future of two of the largest asset managers in the sector.

Figures from Swiss Re show that dedicated investors bought a 62 percent share of ILS issuance in 2012, as the market continued to shift from an opportunistic to more long-term investor base.

The catastrophe bond market pulled ahead this year to grow outstanding volumes for the first time since the 2008/09 financial crisis, as annual issuance stayed on track to hit the $6bn volume forecast and easily surpass the 2011 total of $4.8bn.

RMS Paradex puts Sandy at $17.8bn; Sandy loss disclosures; Listed funds draw in institutions; ILS attracts Magnetar exec

The Bermudian (re)insurer Endurance's acquisition of the assets of Galileo Weather Risk Management demonstrates the weather market's maturity, according to Galileo co-founder Martin Malinow.

A new index fund and the third listed ILS fund are among the upcoming launches that are set to add more investor choice to the market.

With a $2bn-$3bn marine industry loss estimate now a significant component of the overall Sandy burden, the convergence market is looking for possible sources of loss leakage.

Catastrophe models were ready to handle the quirks of Hurricane Sandy, RMS said during a presentation hosted for ILS investors.

Hurricane Sandy's unique profile will test how well the PCS industry loss compilation service covers certain claim categories, as buyers of industry loss-based covers wait to see where the event will settle.

Swiss Re has redeemed two tranches of its Vita Capital IV extreme mortality cat bond worth $125mn one year ahead of maturity, Trading Risk understands.

Connecticut-based Rochdale Securities has stopped producing ILS pricing sheets in recent weeks as the firm struggles to overcome a rogue trading incident that arose in another section of the boutique brokerage firm.

Guy Carpenter has hired former Goldman Sachs trader Sung Yim to support its launch of a secondary trading desk serving the ILS market, Trading Risk can reveal.

Prices on US hurricane cat bonds have regained value on the secondary cat bond market following the post-Sandy price falls last month.

Two private bonds are circulating the market, according to sources. Scor and Aon Benfield Securities are believed to be working on an extreme mortality deal.

The latest Residential Re deal from USAA continued the trend for spread tightening in what was the first hurricane bond to be issued after Superstorm Sandy.

Swiss Re says new levels of stability in the ILS investor base could help reduce spread volatility and make pricing more predictable and stable.

Nephila is believed to have matched its $1bn+ first-half fundraising feat in the second half of the year as it heads toward the 2013 renewals.

If I was to pick out the most persistent talking points for the Trading Risk market in 2012, it would be the idea that the convergence market has not only arrived at the party, but is mingling so successfully that barriers between traditional and alternative capacity have broken down.

Industry loss warranty (ILW) capacity of $150mn-$200mn could pay out if Superstorm Sandy is deemed a $15bn insured loss event, according to sources.

Everest Re will offer a new pillared retro product in the January 2013 renewals to capitalise on high demand for the product.