Performance was fairly flat for the portfolios in December.

This was primarily due to spread narrowing on off-risk, short dated positions. On average, 15% of the positions in the portfolios were maturing in January. There was still an appetite for these positions in the secondary market, thus many were liquidated throughout the month to take advantage of the global portfolio rebalancing from the new issuance activity.

Five new Cat Bonds were issued in December totaling nearly USD 1.6bn. Three were either US or global multi-peril positions, one covered the peril of earthquake in Japan and the other covered the peril of earthquake in California.

2014 reached a new high record demonstrating the robust development of the Cat Bond market: more than USD 8bn of volume issuances and a total outstanding volume in excess of USD 25bn. The average coupon at issuance in 2014 for a Cat Bond was more than 450 bps with an average expected loss standing slightly higher than 150 bps. This is a solid multiple indicating attractive risk adjusted returns, both compared to general (re)insurance deals and also when comparing to other fixed income asset classes. Spreads have appeared to flatten across all levels of risk seniority.

We anticipate strong issuance in 2015 of both publically traded bonds and privately structured transactions.