June 2010/1

Two US subsidiaries of UK insurer Aviva Group have completed a $325mn Regulation XXX reserve financing deal with Credit Agricole, continuing a series of deals predicted by Trading Risk.

German reinsurer Munich Re and transformer vehicle Allianz Risk Transfer (ART) have chosen European industry loss index Perils AG as the trigger on a EUR50mn private capital markets transaction.

Risk modelling firm Risk Management Solutions (RMS) has launched a new longevity model, which will provide a long-term measure of the risk of pensioners living longer.

French insurance giant Axa has re-approached the capital markets with its fourth motor insurance securitisation, issuing EUR97.9mn in the latest Series D notes from its Sparc Europe shelf facility.

Standard & Poor's (S&P) has lowered credit ratings on Swiss-based transformer vehicle Allianz Risk Transfer (ART) by one notch to AA-, to reflect the impending expiry of the bulk of its intragroup business.

The first named storm of the season, Alex, is likely to hit Northern Mexico with hurricane strength winds in the middle of the week, although there is a small chance that it will stray as far North as Houston or Dallas, forecasters said early today (28 June).

Karen Clark, of the eponymous firm, is a leading expert in catastrophe risk assessment and management, working for more than 25 years in the field. Clark developed the first hurricane catastrophe model and founded the first catastrophe modelling company, Applied Insurance Research (AIR), in 1987. She shares her thoughts on the 2010 hurricane forecasts...

Despite talk of resilience and risk picking in the Sunshine State, the dynamics of a traditional property casualty reinsurance market full of surplus capacity held sway at the key 1.6 Florida renewal.

The key US cat renewal date of 1 June this year - which was characterised by excess traditional capacity and falling rates - served to underline the steady presence of collateralised reinsurance in the property cat market.

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.

Dedicated cat funds - usually considered protection sellers of industry loss warranty (ILW) and cat derivatives contracts - have become buyers of cover in an effort to hedge heavy US wind exposures and potential Deepwater Horizon losses.

Trading of 2010 catastrophe derivatives on the Chicago Mercantile Exchange (CME) and Chicago Climate Futures Exchange (CCFE) reached $44mn as the US wind season officially opened this month.

Moody's pulled its downgrade review on two tranches of Glacier Re's 2008 Nelson Re cat bond as the ratings agency determined the notes are unlikely to be hit by Windstorm Xynthia losses and are not negatively impacted by recent upheaval at the Swiss reinsurer.

If the (re)insurance industry is hit by a market changing loss this year, capital will flow into sidecars and existing companies rather than a wave of start-ups.

ILS investors will have watched with interest as the US National Oceanic and Atmospheric Administration (NOAA) added to the consensus for above-average storm activity this year.

Investors in the lowest tranche of Avalon Re - the first ever securitisation of excess liability exposure - will pay a loss of $13mn as the bond defaulted at its final maturity date on 7 June.

Start-up insurance-linked investment firm Elementum Advisors LLC has won a second major mandate with its appointment by "one of the largest North American pension plans".

Populist Florida governor Charlie Crist went against the wishes of his own insurance commissioner and the insurance industry.

European industry loss index PERILS has shaved EUR10mn off its loss figure for Windstorm Xynthia as it released a revised second estimate at the end of May.

After a challenging year for many of Florida's standalone homeowners' insurers, 1.6 renewals at least offered some comfort as the average cost of renewing programmes fell significantly against a backdrop of surplus capacity in the wider reinsurance industry.

Ambitious plans to publicly float an evergreen reinsurance sidecar for the first time ran aground in early June as Catlin Group pulled the listing of Long Bay Re.

Reinsurance broker Willis and New York based Phoenix Capital are set to be the next firms to launch secondary ILS trading desks.

Secondary market trading has ground almost to a halt in recent weeks, as investors tried to digest a very US wind-heavy ILS issuance season.

Pricing on Avalon Re's loss-struck $135mn Class C notes almost doubled to 91 cents on the dollar on the back of last minute trading ahead of their final maturity in June.

A bumper May saw $1.55bn of US wind exposure hit the market through six cat bonds, in a last minute rush to place hurricane cover in the capital markets before the official start of the US storm season on 1 June.

Swiss independent asset manager Horizon 21 is exiting the ILS market as part of a wider restructuring of the firm, Trading Risk understands.

Munich Re has launched a $100mn-plus cat bond on behalf of the Massachusetts state-sponsored windstorm insurance pool in a deal which is expected to close on 5 July.

For a while now, the use of the words "indemnity" and "cat bond" in the same sentence has been met with a curling of the lip and a reflexive recoil from a contingent of cat fund investors.

More than $1bn of prospective convergence market investment may be postponed due to falling (re)insurance rates, wider capital markets disruption and a heavy storm forecast, Trading Risk understands.

Buying pressure from dedicated cat fund managers and traditional (re)insurers has spurred up to 70 percent rate increases on certain industry loss warranties (ILW) as the Deepwater Horizon oil spill in the Gulf of Mexico continues its seep into the convergence market.