Catastrophe bond issuance in the first half of 2016 dropped substantially compared to the same period a year ago, according to a new report from the Property Claims Services unit of Verisk Insurance Solutions.
Total cat bond issuance hit $2.8 billion through 14 transactions from January through June, the PCS report found, down from $4.1 billion and 16 transactions through the first six months of 2015. About $2 billion of the total came from Q1, which is considered a market record.
PCS said that the shift appears to reflect an ongoing change in the ILS market, with factors including competitive pricing for traditional reinsurance, the growth of collateralized reinsurance, the absence of a large Everglades transaction from 2014 through 20116, and the absence of publicly managed sectors in the catastrophe bond space this year.
Twelve of the total H1 2016 cat bond transactions were issued in North America, at a total dollar value of $2.4 billion. In H1 2015, there were also 12 transactions, but their dollar value reached $3.8 billion.
PCS/Verisk said that the average transactions was just above $200 million in the 2015 first half, a 21.5 percent drop compared to the same period in 2015.
While cat bond issuance dropped overall during the first six moths of 2016, cat bond lite activity – after coming to a halt during Q1 – returned during the second quarter at a moderate clip.
PCS said that 6 cat bond lite transactions were completed in the second quarter, reflecting $300 million in fresh capital. The 2015 first half produced 12 cat bond lite transactions reflecting nearly $400 million in new limits, according to the report. What’s more, the average transaction size hit $50 million, up from $33 million in the 2015 first half.
Source: PCS/Verisk Insurance Solutions