Reinsurers undercut cat bonds

Standard & Poor's says the catastrophe bond sector will struggle to issue the expected $4bn billion by the end of the year in the absence of a major claim because of competition from traditional reinsurance, Reuters reports.

Dennis Sugrue, associate director for financial institutions ratings at S&P, said reinsurers transferred $2.35bn in catastrophe risk to capital markets before the start of the US hurricane season, higher than the $1.4 billion last year.

"The relative attractiveness of traditional reinsurance as an option will dampen the issuance of cat bonds over the next 12-24 months," he said. "We are seeing increased diversification and expansion by reinsurers, both by geography and by lines of business, also potentially driving prices down."