Top five cat bond trends : Q2


In this month’s insurance-linked securities (ILS) blog, Tom Johansmeyer, assistant vice president, reinsurance services, ISO, reveals the top five cat bond trends being seen in Q2.

johansmeyer-thomas-portrait.jpgOnce again, we’ve seen an interesting quarter in the global catastrophe bond market. Usually, that means another record set for original issuance or total limits outstanding. But records stopped being interesting a few quarters ago. Simply accumulating deals doesn’t fully speak to the maturation of the sector. The first half of the year didn’t reach 2014’s record-setting level. But frankly, that isn’t really interesting either. At $4.1 billion in original issuance, the market was robust, as one would expect.

To get a sense of why the first half of the year matters, you need to take a look under the covers. The composition of that $4.1 billion in original issuance could offer some insights for the rest of this year and into 2016. While writing our latest catastrophe bond market update, I found five important trends that could impact the insurance-linked securities (ILS) space, particularly as alternatives to catastrophe bond capacity continue to grow.

1. Taking a breather: issuance was strong in the first half of 2015, with 16 transactions resulting in $4.1 billion in fresh capital. And while that’s pretty far off the first-half 2014 result of $5.7 billion, the first half of this year still became the second most active first half in history — edging ahead of 2013’s result of $3.1 billion. Records don’t matter anymore. It’s clear that insurers and reinsurers are beginning to see the potential benefits that catastrophe bonds (and other forms of ILS) afford, which can help them improve risk and capital management. Simply put, the case has been proved, so we don’t need to rely on big numbers to inspire confidence now. Nevertheless, it’s still natural to ask why issuance activity slowed down.

ISO, ILS, cat bonds, Q2

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