January 2014/1

State-backed reinsurer the Florida Hurricane Catastrophe Fund (FHCF) will seek approval to buy up to $1.5bn of reinsurance for the 2014 season, according to reports.

Non-rated carriers spanned the range of quoting behaviour among property cat reinsurers during the January renewals, according to a Guy Carpenter client report obtained by sister publication The Insurance Insider.

The convergence market contributed $10bn of growth to the reinsurance industry's capital base in 2013, Guy Carpenter estimates.

Property catastrophe rates came under significant pressure at the January renewals but underwriters broadly maintained discipline on policy terms and conditions, sister publication The Insurance Insider reported.

Some major property catastrophe cedants chose to take advantage of softening rates to purchase extra reinsurance cover at the January renewals, but others consolidated and trimmed their purchasing.

New sidecar launches continued in early 2014 following a prolific round of 2013 activity, as P&C (re)insurers formed a total of nine known vehicles with just under $2bn of capital.

Florida buyout vehicle on the road; Xaver to cost $930mn

Bermuda has welcomed another hedge fund-backed reinsurer with the launch of Watford Re, a new multi-line company set up by Arch Capital in partnership with Highbridge Capital Management.

Centrum seeks ILS decoupling; Plenum leverages; Credit Suisse caution; Stone Ridge gains; Cat bond lite focus

Zurich-based ILS fund manager Twelve Capital has entered the property fire market, closing its first reinsurance deal covering direct and facultative (D&F) portfolios written at Lloyd's of London, with more potentially in the pipeline, the firm said.

The group of pure cat bond funds tracked by Trading Risk have generated an average 2013 return broadly in line with 2012, as the effect of tightening spreads on new issuance was tempered by a benign loss year and rising mark-to-market gains on historic bonds.

There have been a number of new entrants to the longevity market in the past year with the panel of participants mushrooming to up to 20 entities, according to Aon Hewitt, the lead adviser on the vast bulk of deals.

Deutsche Bank has traded with an ILS fund for the first transaction that uses its Longevity Experience Option (LEO), a template for longevity options launched in November, Trading Risk can reveal.

Average premiums in the ILS and industry loss warranty (ILW) market continued to tumble in 2013, falling during the fourth quarter to levels last seen in 2005, according to broker-dealer Lane Financial.

American International Group (AIG) achieved a significantly broader distribution of its second Tradewynd Re cat bond after providing extra exposure information to allow multiple agencies to model the deal, the insurer's chief reinsurance buyer Samir Shah told Trading Risk.

A trio of public cat bonds raised almost $500mn in the last two weeks of December, taking total 2013 issuance to $7.64bn, as pricing pressure continued in the final marketing rounds of the year.

Collateralised retro provider Catco has shifted its risk profile down for 2014 in response to changing market conditions that have led to decreased demand from some buyers.

All the kerfuffle at last year's Monte Carlo Rendez-Vous about allegedly naive capital and declining cat bond premiums seems quite ironic now that the January renewals are behind us.

Hedge fund-backed collateralised reinsurer DE Shaw pulled back its participation in the January 2014 renewals as retro rates fell, Trading Risk understands.

The cat bond market can expect new issuance of between $7bn-$8bn in 2014, according to a survey of major ILS broker-dealers conducted by Trading Risk.