Press Releases: Update on the Opportunities in Reinsurance Risk

Attached is a recent article on the property catastrophe risk (or reinsurance risk) asset class. Although the article discusses Cat Bonds and the excellent returns Cat Bonds have achieved in the last 10 years, the article also raises issues with Cat Bonds – lack of new issuance and the relative small size of the market. Here are a few highlights from the article:

“The Swiss Re Cat Bond Total Return Index, which lost about 3.7% in the weeks following the March 11 disaster, has gained more than 50% over the past five years.”

“…the cat bond market remains a small slice of the $200 billion catastrophe reinsurance universe; there are about $12.5 billion in cat bonds outstanding, with about $4.4 billion issues last year…about 85% of the cat bond market deals in North American disaster, with European windstorm coverage accounting for much that is left.”

“Another problem with cat bonds is that investing in them is ‘a bit like waiting on the bus,’ says Lane. ‘Sometimes the buses don’t come and sometimes they come in bunches’”

Additionally, the article speaks about how and why sophisticated investors go directly to the traditional reinsurance risk market, especially in times of higher premiums – which we are now seeing.

“That’s one reason some hedge funds have traditionally chosen to enter into various reinsurance agreements directly with reinsurers, purchase shares of publicly traded reinsurance companies or set up reinsurance arms. Following Katrina and other disasters, Citadel, Aquiline Capital Partners, D.E. Shaw, Soros Fund Management and Ritchie Capital Management set up reinsurance shops in Bermuda.”

Juniperus Capital offers a solution to the challenges of investing in reinsurance risk. We provide the same access to the asset class (reinsurance risk) that other sophisticated investors seek, but, and most important, Juniperus Capital offers exposures to the asset class without the risks of the equity markets (public and private).