June 2012/1

Capital inflows of between $6bn and $8bn to the alternative reinsurance markets has only had a limited effect on reinsurance pricing as increases tailed off at the 1 July renewals, according to Guy Carpenter.

Luzi Hitz and Eduard Held argue that the market now has the building blocks in place to trade UK flood risk.

With the mid-year renewals in full swing, Trading Risk explores the convergence markets' inexorable march into underwriting reinsurance risk.

Florida Citizens placed $250mn of traditional reinsurance in a private placement, sitting alongside its $750mn Everglades cat bond, sister publication The Insurance Insider reported.

Average risk adjusted rate rises at the key mid-year reinsurance renewals came in at 2.5 percent to 5 percent in a disappointing outcome for carriers hoping to achieve 5-10 percent increases.

Reinsurance pricing volatility lessened for the Florida renewals this year but variation among reinsurer quotes remained above the levels experienced in the softer 2009 and 2010 years, according to Guy Carpenter.

P&C (re)insurers have moved towards a new "paradigm" where a smaller core balance sheet is complemented by off-balance sheet ventures that provide less volatile fee income and a more efficient way to flex capital, says Goldman Sachs head of structured finance Michael Millette.

RMS adds mortality to life model; Perils places $1bn; DaVinci affirmed; Glacier extended; Juniperus rebrands

Dexion Capital was due to close subscriptions to its proposed DCG Iris fund on 15 June, after Trading Risk went to press, as the fund manager made its second attempt to list a closed-ended ILS fund.

The longevity risk transfer market remains stable despite the exit of three major banks from the sector, experts said at a recent life risk seminar hosted by RMS in London.

The California Earthquake Authority (CEA) bought a $100mn collateralised reinsurance contract to top up its claims-paying capacity for 2012, according to governing board meeting documents.

ILS fund manager Michael Stahel says his team plan to continue to structure "cat bond lite" derivatives after moving out from under the Clariden Leu banking banner to their new home at LGT Asset Management.

Luxembourg-based ILS fund manager Eskatos Capital Management has taken in a number of small new mandates since the start of the year amounting to about EUR30mn to take assets under management in its flagship Multistrategy ILS fund to EUR135mn.

Industry loss warranty (ILW) prices for peak US wind covers have dropped about 10 percent in June amid continued quiet trading conditions after the month's traditional reinsurance renewals closed smoothly, Trading Risk understands.

A couple of large cat bond bid lists were presented to the market in May, with brokers across the secondary ILS sector charged with soliciting quotes on a wide range of outstanding bonds, Trading Risk understands.

Swiss Re's global cat bond performance price return index has surged in early June, with strong buying demand reversing the usual spread widening seen at this time of year.

Everglades Re, the first cat bond from Florida's homeowner insurer of last resort, Citizens Insurance, traded at 103.5 cents to the dollar in early June, as prices for recent issuances rose significantly on the secondary market.

The reset of Travelers' 2009 cat bond Longpoint Re II under the new RMS Version 11 hurricane model created a $1.25bn hole in the insurer's previously tight US cat programme, as sister publication The Insurance Insider reported this month.

The gamble of being one of the last cat bond issuers to market ahead of the US hurricane season paid off for Travelers this year as it was the only sponsor to see prices on its offer narrow during the marketing process.

Bermudian collateralised reinsurance writer Aeolus is understood to have grown its capital base to $1.7bn after completing further fundraising under its new structure in the first half of the year.

Where did the past six months go? Hurricane season is already upon us, it's the Trading Risk awards next week and Monte Carlo bookings are starting to go in the diary.

Institutional investors are continuing to swell the convergence market as a stream of new mandates were approved before the official start of the US wind season on 1 June, Trading Risk understands.

Bermudian (re)insurer Alterra is still working on a renewal of its retro-focused $200mn+ sidecar New Point Re IV, Trading Risk understands.