Catastrophe bond issuance crossed the crucial billion-dollar threshold for the second year in a row in Q1, and cat bond lite momentum also continued its upward trend, according to a new report from the Property Claim Services unit of Verisk Insurance Solutions.

Insurers and reinsurers issued $1.5 billion in catastrophe bonds during the 2015 first quarter, according to the report, which relies on data from the Deal Directory. That’s a 23 percent spike from $1.2 billion in cat bond issuance during the 2014 first quarter.

Of that number for the 2015 first quarter, $1.2 billion of the total cat bond issuance took place in North America, as did 6 of the 7 total transactions. In the 2014 first quarter, $965 million of the total cat bond issuance happened in the North American market, or 5 of 6 total transactions.

Meanwhile, sponsors completed two catastrophe bonds with coverage for Canada in the 2015 first quarter, up from just one in the same period in 2014.

The PCS report noted that cat bond lite momentum also kept growing during Q1. Consider that there were $242 million in publicly revealed cat bond lite transactions in 2014, according to the Artemis data. So far in 2015, there have already been seven transactions with limits of nearly $200 million.

As the report explains, cat bond lite transactions are meant to avoid the more “onerous issuance requirements of traditional catastrophe bonds” but also still bring “structural discipline and transparency” to the table. That dynamic lets sponsors use increased flexibility to pursue smaller and more targeted transactions quickly, PCS said. At the same time, they can also manage the cost of capital.

“Interest is growing in the cat bond lite structure across the market,” PCS noted. “The use of cat bond lite structures could increase cedent access to – and participation in – the global catastrophe bond market.”

Source: Property Claims Services; Verisk Insurance Solutions

Topics Catastrophe