No New Property-Cat Bonds in Q3: Verisk

There wasn’t a single new property-catastrophe bond issued in the 2014 third quarter, the first time that’s happened this time of year in at least a decade, Verisk Insurance Solutions asserts in its latest report.

It’s a big contrast from the 2013 third quarter, when $1.5 billion was raised based on a large amount of July activity involving, in part, three-first time sponsors who brought in over $400 million, the report noted. That milestone topped the previous issuance record of $1.2 billion in Q3 2007.

Rather than breaking a record, the lack of property-catastrophe bond issuance in Q3 is more of a return to form, Tom Johansmeyer, director of marketing for Verisk Insurance Solutions – Claims and Crime Analytics, told Carrier Management via email. His division issued the report.

“Q3 historically has been quiet,” Johansmeyer said. “Last year was an anomaly with all the July issuance activity. Normally, Q3 only has either non-U.S., or non-property issuance activity (such as mortality and workers compensation], which we don’t track in our report.”

He also said “it’s positive that this form of risk transfer has given re/insurers another tool to use in managing risk and capital, and I’d say the same for cat bond lite.”

That doesn’t mean that Q3 was totally quiet however. It did have one workers compensation transaction on the market renewed, according to the report.

Of course, the year’s not over yet. The report points out that 2014 could still become a record-setting year for catastrophe bonds. How could this be? That’s because the fourth quarter has a lot more activity, “with sponsors using bonds as part of a broader risk and capital management plan ahead of the Jan. 1 renewals. A repeat of fourth-quarter 2013 issuance levels would put full-year 2014 issuance far ahead of last year’s,” the report states.

Here are some other 2014 catastrophe bond statistics, courtesy of the Verisk Insurance Solutions report (with data from the Artemis.bm Deal directory):

• Insurers and reinsurers issued about $5.7 billion in catastrophe bonds in the first nine months of 2014. That’s a 6 percent rise over the same period in 2013.
• Also, catastrophe bonds issued with at least some North American Exposure hit $4.8 billion in the first nine months of 2014, up from $4.3 billion in 2013.
• Completed catastrophe bonds are declining. This number hit 18 in the first nine months of 2014, down 28 percent from the 25 completed over the same period in 2013, according to the report.
• Completed catastrophe bonds with exposure to North American risk also dropped to 14 through the 2014 third quarter. That compares to 22 last year, a 36 percent drop.
• Catastrophe deal sizes have climbed even as the number of completed transactions dropped. For the first nine months of 2014, the average deal size hit $317 million, a 50 percent hike over the $216 million average from the first nine months of 2013.
• In the first nine months of 2014, ten cat bond lite transactions were completed (including three in Q3), raising $242 million in new capital through what Verisk Insurance Solutions referred to as “those innovative platforms.”

Source: Verisk Insurance Solutions – Claims and Crime Analytics