Catastrophe bond issuance for the 2017 first half reached new records for the sector, with its nearly $8.8 billion in new limit coming in larger than the biggest full year in catastrophe bond market history, the Property Claims Services Unit of Verisk Insurance Solutions said in its latest report.
PCS tallied 29 transactions in the 2017 first half. For the 2017 second quarter, there were 21 transactions and $6.5 billion in new limit, a result that PCS said was among the top 5 years.
In the 2017 first quarter, PCS had said it was at a loss to explain the record $2.3 billion in catastrophe bond issuance, considering a lot of transactions shifted from more typical behavior. The firm also refrained from pointing to specific factors driving Q2 results.
“With this much activity, it’s hard to characterize it in specific terms,” PCS said. “With so many catastrophe bonds completed, it’s safe to say that there’s (at least) a little of everything.”
The report noted that transactions came from experienced sponsors but there were also four debut issuances. Out of the total, 14 transactions involved $200 million or less and were considered small, with the rest varying from $200 million to $950 million, and two almost hitting $1 billion a piece.
Another three sponsors produced more than $2 billion in capital raised for the second quarter. When looking at the first half, five sponsors were responsible for $3 billion in combined capital raised.\
Fourteen transactions came from deals worth less than $200 million since the beginning of the year, a trend that PCS said reflects the power of larger catastrophe bonds.
Other Q2 and H1 trends from the PCS report:
- Sponsors completed 9 cat bond lite transactions worth $357 million during the 2017 first half, 6 of which came from Q2. Over the same period a year ago, there were 6 cat bond lite transactions, though they were worth $300 million in aggregate limit.
- While the United States draw most of the catastrophe bond market’s focus, there were a number of issuances in Canada, Europe and Japan, as well as Turkey, Mexico and China.
- The market appears to be looking to move beyond catastrophe bond issuance activity for property/catastrophe events, as PCS said the market wants more variety. One possible option for diversification: Specialty lines.