Continued growth in catastrophic risk bonds from state and government-sponsored insurance organisations is expected this year, according to a report by Fitch Ratings.
Investor demand remains considerable and the cost of sponsoring a cat bond has continued to converge with the cost of ceding risk to the traditional reinsurance markets.
The market has experienced a significant influx of deals from repeat sponsors such as Citizens Property Insurance, Louisiana Citizens and the North Carolina JUA over the past five years.
Continued growth is expected to remain for these types of sponsors in the US, as well as internationally.
Well-structured cat bond deals are becoming a practical solution in the higher risk portions of sponsor reinsurance programmes, which is expected to drive further issuance in 2014.
Continued US growth is expected to come from repeat sponsors looking to expand their use of the capital markets as well as from international organisations presented with increasingly innovative and viable risk transfer alternatives.
The availability of potential sponsors in the US will be moderated by the limited number of state wind pools and other publicly sponsored catastrophe insurance organisations currently operating.
