Bloomberg News

Cat Bond Issuance to Grow to $6 Billion on More Demand, Axa Says

February 01, 2012

Feb. 1 (Bloomberg) -- Axa SA, Europe’s second-biggest insurer, said total issuance of bonds designed to protect insurers from the risk of paying out on natural disasters could increase by 30 percent to $6 billion this year.

“More new sponsors are coming to the market” looking for an alternative for reinsurance, while insurers issue more of these catastrophe bonds to raise capital after a year of heavy losses from natural disasters, Christophe Fritsch, head of insurance-linked securities at Axa Investment Managers, said in an interview in Bern, Switzerland.

The amount of catastrophe bonds outstanding may expand to $14.5 billion in 2012, from about $13.6 billion this year, according to Swiss Re Capital Markets, a unit of the world’s second-biggest reinsurer. Cat bonds returned 6.2 percent since April 1, after dropping 4 percent following the March earthquake in Japan, the Swiss Re Global Cat Bond Performance Total Return Index shows.

Institutional investors including pension funds, Fritsch’s main clients who buy cat-bond funds, receive an average return of 7 percent, largely insulated from macroeconomic or financial- market developments, Fritsch said. Meanwhile, they risk losing some or all of their money if a catastrophe occurs.

Fritsch has headed a team of four portfolio managers in Paris since 2008 and manages about $300 million in insurance- linked assets through two funds. Axa Investment Managers is the asset-management unit of Paris-based Axa.

--Editors: Steve Bailey, Jon Menon

To contact the reporter on this story: Carolyn Bandel in Zurich at cbandel@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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