May 2010/1

Experienced underwriter Darren Redhead is set to leave Bermuda-based hedge fund-backed property catastrophe reinsurer, DE Shaw, after three years at the firm.

Leading Swiss cat bond investment manager Clariden Leu has closed its flagship cat bond fund to new investments, as capital inflow outsripped cat bond issuance in the first half of the year.

Munich Re has launched a $100mn+ cat bond on behalf of the Massachusetts state-sponsored windstorm insurance pool in a deal which is expected to close on 1 July.

Ex-Tradition Re brokers Patrick Gonneli and Stephen Breen have brokered $10mn of CME Hurricane Index (CHI) cat options in their first trade at new employer, TigerRisk.

The Massachussetts state-sponsored windstorm insurance pool is understood to be close to launching a cat bond, in a move believed to be inspired by recent deals from North Carolina, Trading Risk can reveal.

Investors in the lowest tranche of Oil Casualty Insurance Ltd’s (OCIL) Avalon Re excess liability cat bond will pay a loss of $13mn as the bond defaulted at its final maturity date today (7 June).

Swiss Re has issued another $50mn of notes under the long-running Vita Capital series of transactions in the first transfer of extreme mortality exposure since November last year.

Climate Exchange plc, the parent company of the IFEX cat futures trading platform is being sold to the InterContinental Exchange (ICE), in a £395mn deal which will be effective in early July this year.

ILS veteran USAA has closed its latest $400mn Residential Re issuance, taking total cat bond volumes at the official start of the 2010 US hurricane season today (1 June) to $2.4bn. 

Bryan Bumsted, head of retro at Bermudian (re)insurer Lancashire Group, has resigned from the firm to join George Soros-backed retro vehicle Q Re, Trading Risk can reveal.

Four tranches of notes with a total value of $400mn are expected to price today (25 May) as ILS veteran USAA prepares to close its 14th Residential Re cat bond, Trading Risk understands.

The first day of trading for Bermudian-headquartered (re)insurer Catlin’s listed Long Bay Re sidecar has been delayed  to 4 June.

US insurer Nationwide Mutual has closed the $185mn renewal of its 2008 Caelus Re cat bond, taking 2010 ILS issuance over the $2bn mark.

Blue Fin III has priced and placed successfully, with $150mn notes issued in two tranches: $90mn Class A and $60mn Class B.

Market data

Diversifying perils may not be the key to a happier, healthier ILS market, according to investors, amid a surprising amount of debate within the investor community on the importance of diversifying the risk ceded into the capital markets.

Risk-picking and innovation key for traditional and non-traditional capacity to support troubled Sunshine State

A sluggish first quarter saw total ILS issuance of $300mn - just 50 percent of what was achieved in the same quarter of 2009 - but in contrast during Q2 there will be between five and 10 cat bonds, according to reports from brokers Aon Benfield Securities and Guy Carpenter.

Recent months have seen significant levels of trading in ILS with close-dated maturities - or stub bonds - leading up to the 2010 Atlantic hurricane season.

Secondary pricing on distressed bonds was a mixed bag in the first quarter of 2010. Blue Coast, Kamp, Newton and Willow recovered as Nelson Re's G class, Avalon Re and Crystal Credit wallowed in the doldrums.

Four additional transactions through April and the start of May pushed total issuance in 2010 to $1.6bn. Three transactions were sponsored by US primary insurers while the fourth came from German giant Munich Re.

There has been a storm of cat bond activity in recent weeks with $810mn of notes placed in May, and $850mn of notes in the pipeline expected to close before June.

$10mn of trades on IFEX; Dodd Bill warning; RMS extends Paradex to Japan

An increase in speculative trading of weather derivative instruments could benefit the traded and customised end-user sectors, according to industry experts.

Tradition Re has ceased to broker reinsurance business, and will instead focus on its core derivatives trading activities, according to sources.

Hannover Re will not continue its "L" series of embedded value life securitisations this year with L8, despite aggressive expansion by the (re)insurance giant in the life sector."The market will not see a ‘L'-type transaction in 2010, but potentially in 2011," Regine Kielich, associate director at Hannover Life Re, told Trading Risk.

Life capacity crunch to boost swaps; Willis beefs up ILS team with Dubinsky hire; Solvency II boost for longevity swaps; Disasters fuel state pools; Perils estimates EUR1.28bn Xynthia loss

Exchange listing of catastrophe bonds could be the trigger that attracts more pension money and other institutional investors into the sector, according to Greg Wojciechowski, president and CEO of the Bermuda Stock Exchange (BSE).

Longevity risk products - including longevity swaps and life settlement portfolios -could make "great retail products" despite their complexity, according to alternative investment house Centurion Fund Managers.

Standard & Poor's (S&P) has raised its rating on Avalon Re's $135mn Class B notes from CCC to BBB+, as the notes approach maturity on 7 June 2010.

Fierce competition among cat bond dealers has pushed fees for services well below those prevailing for comparably rated securities in the capital markets.

Losses from the Deepwater Horizon oil rig disaster in the Gulf of Mexico (GoM) threaten to spill over into the convergence market, as various industry loss warranty (ILW) and collateralised reinsurance programmes could be triggered by the estimated $2bn event.

As Bermudian-headquartered (re)insurer Catlin concludes its fundraising for perpetual sidecar vehicle Long Bay Re, there is growing speculation that market maker Deutsche Bank may have to buy the lion's share of the $150mn equity at an IPO.

Interdealer broker Vyapar Capital Market Partners has launched an electronic trading platform for exchange-cleared over-the-counter (OTC) weather derivatives, Trading Risk can reveal.