Cat securitizations up slightly in 2003

There was modest growth in the use of catastrophe securitizations last year, says California-based risk modeling company Risk Management Solutions (RMS). In its global study of seven publicly reported transactions, RMS estimates US$1.8 billion in cat securitizations were placed in 2003, driven by a larger average transaction size. Since 1999, cat securitizations have averaged US$1 billion each year.Of note, however, is the increasing innovation to cover new risks. Three deals in particular are cited: the securitization deal to cover terrorism risk for cancellation of the 2006 FIFA World Cup of soccer, to be held in Germany; cat-indexed notes to cover rise in mortality in the U.S., U.K., France, Switzerland and Italy issued by Vita Capital on behalf of Swiss Re; and major windstorm damage cover for a major European electricity supplier. “The innovation securitizations seen in 2003 demonstrate that new perils and lines of business can be effectively quantified for investment purposes, and that the capital markets are willing to provide alternative financial coverage,” says Dr. Gordon Woo, RMS risk consultant.