Catastrophe bond issuance reached $2.3 billion in the 2017 first quarter, a record level that landed slightly higher than the same period a year ago, the Property Claims Services Unit of Verisk Insurance Solutions said in its latest report.
PCI was at a loss as how to explain the results, however, considering a lot of catastrophe bond transactions shifted from more typical behavior, as seen in the 2016 first quarter.
“The first quarter of 2017 was a real head-scratcher,” the PCS Q1 2017 Catastrophe Bond Report said. “It was packed with veteran catastrophe bond sponsors – but looked nothing like the first quarter of 2016, aside from the headline number. Some major players didn’t return to the market, and others moved their issuance activity up to the first quarter from the second.”
PCS added that half the transactions were under $200 million, which is considered small, and two large transactions of approximately $500 million helped lift the aggregate limit to the $2.3 billion result.
The Q1 2017 results involved 8 transactions, versus 9 in the 2016 first quarter, which produced $2 billion in catastrophe bond issuance, the PCS report noted.
Among the catastrophe bond issuance trends PCS noted from the 2017 first quarter:
Insurance linked securities still matter, as the report noted that continued significance of ILS market demand for new risk areas and types. ILS focus runs the gamut, from global marine and energy to terror, and cyber, among many other categories, the PCS report said.
Cat Bond Lite continued to be a factor in the market, with three transactions during Q1 ranging from $5 million to $65 million, reaching $118 million in total. Two of the three transactions had indemnity triggers, though one was not disclosed. None of the transactions were completed during Q1.
A number of usual catastrophe bond regulars did not return to the market in Q1, and PCS said that many of the transactions were small and primary market sponsors were behind them. Typically, first quarters have “more large retrocessional transactions and even large primary market issuance activity,” PCS said.
Private transactions are growing. Two of five completed private transactions were not categorized as cat bond lite in the PCS report. The idea is that a greater use of private catastrophe bonds could indicate a continued focus on increased flexibility and frictional cost reduction, but a dual continued access to capacity from providers that have liquidity mandates.
Source: PCS/Verisk