A “diverse and steady” stream of new issuances helped create a “dynamic” catastrophe bond market in the first quarter of this year, according to Guy Carpenter.

Its Catastrophe Bond Update says quarterly issuance for the property and casualty (P&C) market was the highest on record, with $US1.49 billion ($1.93 billion) of the 144A P&C catastrophe bond limit successfully placed.

[Most catastrophe bonds are issued in what are called Rule 144A offerings, which are available only to large institutional investors and are not subject to the US Securities and Exchange Commission’s registration and disclosure requirements. Many of the normal investor protections common to traditional registered investments are missing.]

The highest quarterly volume of 144A P&C cat bonds matured in the first quarter, returning $US3.54 billion ($4.58 billion) of principal to investors.

Guy Carpenter says investors continue to show interest in high-risk and higher-yielding products, while the market is also responsive to “structural innovation”.

“Evidence of price discipline and thoughtful conversations between protection buyers and sellers about adequate compensation for risk” is a welcome development, Guy Carpenter says.

“It is clear that catastrophe/insurance risk still provides an attractive risk-return profile and that the asset class will continue to occupy an important strategic role in the investment portfolios of institutional investors.

“Despite considerable spread reductions over the past 24 months, there are more investors participating in the asset class than ever before. The case remains that there is significant additional capital available in the global financial markets eligible to participate in this asset class.”

Guy Carpenter believes record issuance activity for the first quarter “could portend big things to come for the remainder of the year”.