Munich Re published a report where it said that insurance-linked securities are back in business.
“Apart from a temporary increase in price, the financial crisis has in no way altered the fundamental advantages of insurance-linked securities as an attractive complement to traditional reinsurance,” stated Munich Re’s risk trading unit in the report.
The reinsurer said that the demand for financial instruments that securitize catastrophe risks from property insurance and transfer them to the capital markets has increased significantly. Securitization transactions for these bonds alone had reached almost $2 billion by the end of July.
“Given the backlog demand involved, we fully expect this positive trend to continue and predict an issue volume in the region of $3 billion for the whole of 2009,” the report said.
However, the reinsurer does not believe that record figures from 2007, when cat bonds totalling some $7 billion were placed, are likely to be repeated.