NEW YORK (Bloomberg) — Reinsurer bondholders are "particularly vulnerable" in the event of a major catastrophe because the firms trade below book value, making it harder to raise funds by selling equity, Moody's Investors Service said.

The difficulty reinsurers may face raising capital by issuing stock is the biggest concern of Moody's senior credit officer Kevin Lee, he said today in a research note.

Munich Re, the world's largest reinsurer, has a price to book value of 0.82, and No. 2 Swiss Reinsurance Co. has a ratio of 0.66, according to Bloomberg data. Book value is a measure of assets minus liabilities.

"Nearly all reinsurance stocks — in an unprecedented way — continue to trade at well below book value," Mr. Lee wrote.

"This makes bondholders in the sector particularly vulnerable, we think, as the low price-to-book ratios raise doubts about the sector's ability to recapitalise if faced with major catastrophe losses."

Reinsurers, which sell back-up protection to insurance companies, issued corporate bonds at the fastest pace in almost five years at the end of the first quarter, in part to buy back their own shares. Axis Capital Holdings Ltd., PartnerRe Ltd. and RenaissanceRe Holdings Ltd. sold a total of more than $1 billion in debt in March.

Forecasters expect this year's hurricane season may be the most active since 2005, which was the worst in history with more than 1,500 US deaths and $115 billion in damages, Lee wrote.

The Atlantic season began June 1 and ends November 30.

"After a major event, the entire industry may be coming to the capital markets at the same time," Mr. Lee said.

"But unlike after Hurricane Katrina, there may not be enough capital to go around."