8 January 2016 Alternative Risk Transfer

Cat bond issuance falls 25% in 2015: PCS

Catastrophe bond issuance activity in 2015 fell approximately 25 percent year over year by limit, according to a report from Property Claims Services (PCS), a division of Verisk Analytics.

The firm said that this finding suggests continued insurance-linked securities (ILS) market maturity as cedants and markets explore the full range of risk transfer alternatives available to them in this sector.

“Perhaps counter intuitively, the decline in original issuance indicates that the market continues to gain a deeper understanding of how ILS can support improved risk and capital management worldwide,” said the report.

“The ongoing rise in collateralised reinsurance use and the relative upsurge in industry loss warranty (ILW) activity demonstrate a continued commitment to ILS, as well as a growing sense of which approach makes the most sense for different cedant requirements.”

At $6 billion of issuance, 2015 became one of the five most active catastrophe bond issuance years in market history, according to the Verisk. It said that there are many signs that the catastrophe bond market continues to mature, particularly in relation to geographical diversity and adoption by the publicly managed entity space.

“As we’ve observed over the past couple of years, it would be a mistake to judge the health and growth of the catastrophe bond market only, or even primarily, in terms of the top-line issuance number,” said PCS. “Rather, we need to see further foundational growth—a bigger base for future issuance activity.”

The report also said that the future of the catastrophe bond market—and the ILS market as a whole— will come down to the attraction of more original risk.

“New opportunities for sustainable profitable growth will emerge when risks currently not covered in the global insurance and reinsurance supply chain (or risks not covered effectively or sufficiently) become accessible to capital providers worldwide,” it said.

It added that original risk needs to be the top priority for the market in 2016 and beyond.

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk