2016 Cat Bond Issuance Nears 2015 Levels, Drops From 2014 Heights

A strong fourth-quarter rally helped make 2016 catastrophe bond issuance only slightly lower than the year before, according to the Property Claims Services unit of Verisk Insurance Solutions. But final results are still far from heights reached in 2014.

Sponsors finished more than $2 billion in issuance in Q4. What’s more, the period “was nearly as active as the same period in 2014 and up significantly year over year,” the report said.

For the year, insurers and reinsurers completed $5.6 billion in catastrophe bonds in 20 transactions, down slightly from $6 billion and 24 transactions during the 2015 fiscal year. While transactions were lower in number, their individual size was higher, PCS/Verisk said.

Both years’ results are much lower than the nearly $8 billion in catastrophe bond issuance produced in 2014.

Report highlights:

• For Q4, three of the quarter’s four transactions were higher than $200 million, the bulk of which came from Galilei Re. PCS said that this reflects a continued trend toward larger catastrophe bonds from experienced sponsors.

• For all of 2016, 10 catastrophe bonds were higher than $200 million, accounting for 75 percent of capital raised. The largest came from Galilei Re, which brought $750 million to market. That’s the biggest issuance (along with Sanders Re) not coming from a publicly managed entity.

• Publicly managed entities completed six transactions during 2016, raising nearly $2 billion. The only transaction coming from a publicly managed entity in 2016 was from Ursa Re, at $500 million.

• There was no cat bond lite market activity in Q4, but issuance for all of 2016 in this category amounted to 10 transactions representing $420 million in new limit. PCS/Verisk said that the trend matched 2015, where there was no Q4 cat bond lite activity, but the full year featured $490 million in cat bond lite issuance.

Source: PCS/Verisk Insurance Solutions