A new wave of micro cat bond listings looks likely for the Bermuda Stock Exchange (BSX) in 2014, with the Bermuda insurance-linked securities (ILS) market shaping up to be as busy as 2013 — a record year for the instruments with Bermuda garnering approximately half the global business — according to Appleby lawyers Timothy Faries and Alison Dyer-Fagundo along with Appleby Management (Bermuda) managing director Carol Feathers.

Catastrophe bonds are risk-linked securities that transfer a specified set of risks from a sponsor to investors.

The three professionals were reporting on the ILS market in a piece for the law firm that was republished by Mondaq, an online publication that includes legal, financial and regulatory information from around the world.

Describing 2013 as a “significant year” for ILS listings, they said 2014 looks set to be “equally active”.

They pointed to streamlined procedures at the BSX which “increase speed-to-market for subsequent issues and encourages interest in listing ‘micro cat bonds’.”

“Will 2014 herald the emergence of a new wave of micro cat bonds?” they asked.

“We have noted several listings of smaller cat bonds on the BSX in recent months. The BSX continues to work in tandem with listing sponsors and issuers to increase speed-to-market. The emergence of note programmes linked to segregated account company platforms has also added a fresh dimension to the catastrophe bond market and creates opportunities for new participants to enter the market.”

They added: “Listing sponsors and issuers continue to work in tandem with the BSX to find ways of increasing speed-to-market and the BSX is now positioned better than ever to increase its share of the ILS market.”

The article explained that the convergence of the capital and insurance markets are greatly simplified in the offshore world. “For example, in the USA there are separate regulatory bodies and statutes to regulate securities, commodities, and insurance products.

“Innovative products which cross any of these boundaries require inordinate amounts of effort to develop and may end up not suiting the true needs of the issuer or the investor. In Bermuda, these obstacles are minimised.”