Cat bonds will see continued demand from public entities


Participation in the ILS space from public entities will continue to grow as investment appetite from pension funds shows no signs of slowing.

That is the view of Mike Millette, managing director at Goldman Sachs and Shiv Kumar, senior analyst at Goldman Sachs Asset Management, speaking to Bermuda:Re's sister publication Intellligent Insurer ahead of the SIFMA Insurance and Risk Linked Securities Conference in New York next week.

“ILS, collateralised covers and traditional reinsurance are all now important components of most reinsurance programmes,” they say, “and all these products are offering very competitive terms, conditions and pricing to the ceding companies.

“Public entities already have a great issuance record in the cat bond market. Florida Citizens has issued $1 billion of cat bonds. There has also been issuance from North Carolina, Massachusetts and Louisiana pools as well as the California Earthquake Authority. The Florida Hurricane Catastrophe Fund has publicly discussed potential issuance of cat bonds. 

“Internationally, Mexico and Turkey have transferred risk to the ILS market. We expect this trend to continue and the overall issuance from public entities to increase.”

On the investing side, the pair say that national, state and provincial pension funds across the US and world have become the largest single investor group in cat bonds working indirectly through professional ILS managers.

“We believe that the sector will see more inflows from pensions, sovereign wealth funds and endowments,” they said. “However, besides cat bonds, there should be healthy activity in sidecars, listed public ILS vehicles, and hedge-fund backed reinsurer formations.”

To read the full article in Intelligent Insurer’s supplement called ILS from all angles, look out for a copy at the SIFMA conference, or email John Walsh to obtain a digital version.


cat bonds, public-private partnership

Bermuda Re