A.M. Best Special Report: Last Resort Insurers Welcome Relief From Growing Catastrophe Bond Market

OLDWICK, N.J.--()--The convergence market has provided an opportunity for entities that act as insurers of last resort to transfer some of their peak exposures to the capital markets, according to a Best’s Special Report titled, “Last Resort Insurers Welcome Relief From Growing Catastrophe Bond Market.” These entities—including but not limited to fair access to insurance requirements plans, beach/windstorm plans and quasi state-run insurance companies—welcome the availability of insurance-linked instruments such as catastrophe bonds, industry loss warranties and insurance-linked funds, as exposures continue to grow via increased property values. This growth has occurred despite depopulation of property policies by some of these entities and the private insurance/reinsurance market’s cautious approach in accepting wind exposures from high-risk areas.

Like other primary insurance companies with peak exposures, these entities are able to compare the cost of traditional reinsurance coverage with the use of insurance-linked instruments for transferring some of their peak risk. This added benefit may reduce their cost of reinsurance.

Approximately USD 5.6 billion of catastrophe bonds have been issued by seven of these entities from 2009 through Sept. 30, 2014. The two main perils are hurricanes and earthquakes occurring in their respective regions. Hurricanes accounted for approximately USD 4.53 billion, or 81.2%, with earthquakes taking the other USD 1.05 billion, or 18.8%, for these entities during the period reviewed by A.M. Best.

For a full copy of this special report, please visit: http://www3.ambest.com/bestweek/purchase.asp?record_code=231236.

This report originally appeared in Best’s Journal, dated Nov. 24, 2014. Best’s Journal is a biweekly publication that presents A.M. Best’s original research, analysis and commentary on the global insurance industry and is available exclusively as part of a subscription to the Best’s Insurance News & Analysis service. More information about the Best’s Insurance News & Analysis subscription service is available at www.ambest.com/sales/bina/default.asp.

To order, contact Customer Service at (908) 439-2200, ext. 5742 or at (800) 424-2378 when calling from the United States and Canada.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Asha Attoh-Okine, 908-439-2200, ext. 5716
Managing Senior Financial Analyst,
Insurance Linked-Securities
asha.attoh-okine@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best
Asha Attoh-Okine, 908-439-2200, ext. 5716
Managing Senior Financial Analyst,
Insurance Linked-Securities
asha.attoh-okine@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com