According to the latest Catastrophe Bond Report by Verisk Insurance Solutions, insurers and reinsurers issued approximately $2 billion in catastrophe bonds in the first quarter of 2016, up 35 percent from last year’s record result.
Sponsors completed nine transactions in the quarter, up from seven in the first quarter of 2015, and the average transaction size climbed slightly to 5 percent,
Seven of the nine catastrophe bonds completed so far this year had exposure to North America, said Verisk. Atlas IX Capital DAC and Galileo Re both included Canada (using the PCS Catastrophe Loss Index), with the latter also covering Europe.
Two catastrophe bonds with no North American exposure came to market—both had indemnity triggers and focused on Japan.
For the first time, indemnity-triggered Caelus Re used data from Property Claim Services (PCS) for independent catastrophe designation.
Verisk said it was one of four transactions in the quarter involving data from PCS. Two had index triggers and Espada Re and Caelus Re used an indemnity trigger approach.
Catastrophe bonds with data from PCS accounted for nearly 60 percent of the limit raised last quarter (and two-thirds of the transactions), excluding Akibare Re and Azora Re, which didn’t cover any North American risk, according to the report.
While the quarter’s transactions may have generally covered traditional ground, chatter across the market could signal a much broader mandate for catastrophe bonds—and insurance-linked securities (ILS) in general according to Verisk.
“There’s a clear sense that members of the ILS community want to see the sector grow—geographically and into new lines of business,” said the report.
It added: “The appetite isn’t new, but the urgency surrounding many of these discussions has certainly increased from years past. It’s no longer a question of whether ILS can expand to improve cover for the likes of terror, cyber, and energy—not to mention corporates. Rather, the market is actively looking for ways to make it happen.”
Use of PCS data in first-quarter catastrophe bonds grew nearly 20 percent year over year, following a 72 percent increase from the first quarter of 2014 to the first quarter of 2015.
Verisk said: “This year, four first-quarter transactions used PCS data, unchanged from 2015. However, limit raised with PCS-triggered transactions reached $950 million, up from $800 million last year.
“The two index-triggered transactions accounted for $600 million, with the two indemnity-triggered transactions using PCS for independent catastrophe designation accounting for the remaining $350 million.”
Two first-quarter transactions used PCS for independent catastrophe designation in indemnity triggers. Espada Re, a first-time issuance from a veteran catastrophe bond sponsor, brought $50 million in fresh capital; and Caelus Re raised $300 million.
While use of this approach is up significantly from the first quarter of 2015—with only one catastrophe bond using PCS for catastrophe designation—the result is roughly consistent with the first quarter of 2015, when two transactions accounted for $365 million in new limit, according to Verisk.
Verisk Insurance Solutions, Insurance, Reinsurance, Cat bonds, Global