Willis has declared that the impact of Hurricane Sandy on the catastrophe bond market is likely to be muted, based on current estimates.
According to the broker, the scope and scale of the storm makes it unlikely that any bonds will be triggered solely by Sandy; however if losses mount and early estimates prove wrong, some bonds could be at risk.
The firm also reports that there were three new catastrophe bonds issued in the third quarter of 2012 totalling $525 million, down slightly from four transactions totalling $676 million in the same period a year earlier.
Commenting on the outlook for the market, Bill Dubinsky, head of insurance linked securities at Willis Capital Markets & Advisory, says: “Spreads have tightened in the primary and secondary markets since the late second quarter and there has been strong investor demand and successful execution at the lower end of pricing guidance.”
Looking further ahead, Mr Dubinsky expects the market to expand to encompass more risks and shift towards a greater acceptance of indemnity triggered structures.
Willis’ forecast for total 2012 catastrophe bond issuance remains in the $5.5 billion to $6 billion range.