David Priebe of Guy Carpenter and Co says 2009 has seen issuances worth $1.38bn

Nine catastrophe bonds have been issued in the first half of 2009, with six of these in the second quarter alone, according to a report by Guy Carpenter and GC Securities.

The rebound has been aided by continued stabilisation in the global financial markets, the report said, and indicators point to a further increase in activity.

David Priebe, chairman of global client development at Guy Carpenter, said it represented a positive rally, adding: “A number of converging factors could lead to an increase in catastrophe bond activity in the second half of 2009, spurring sponsors who may have postponed issuances in the first and second quarters of the year. These include a continued improvement in the broader capital markets and an increase in risk capacity.

“Conversely, if we see an active hurricane season that generates significant insured damages, or if the financial market conditions do not continue to improve, cat bond spreads will remain high – and could even widen. Absent these two factors, and given the current supply and demand conditions, we expect catastrophe bond spreads to narrow during the second half of 2009.”

Issuance in 2009 is still lower than in 2008. The nine cat bonds seen so far in 2009 account for aggregate risk capital of $1.38bn, while the equivalent H1 2008 figure was $2.4bn for 11 transactions.

From the first half of 2008 to the first half of 2009, risk capital issued declined 42.5%, due in part to pricing conditions.

Two catastrophe bond transactions are currently planned for the third quarter of 2009: one with European wind exposure and one with US wind exposure.

Historically, the third quarter has accounted for only 14 percent of risk capital issued, largely a quiet period because of hurricane season and traditional renewal dates.

A total of $1.59bn in catastrophe bonds matured in the second quarter of 2009, bringing the year to date total of matured risk principal to just over $2.24bn. Another $960m is scheduled to mature in the second half of the year.

Overall, cat bond risk capital outstanding is currently at mid-year 2007 levels.

Catastrophe bond spreads were consistent from the first quarter of 2009 to the second – up 25% to 50% relative to 2008 levels.

Three of the six transactions in the second quarter of 2009 upsized relative to initial announced placement targets, as the market reacted positively to the relatively high yields.