Innovative cat bonds expected in 2015

More innovative catastrophe bonds are expected in 2015, following a record year of activity in 2014.

This is according to GC Securities’ latest report on cat bond activity in 2014, and expectations in 2015.

The broker-dealer said that in 2015 it expects innovative cat bonds to be issued, with structural features on a larger scale that may include non-modelled natural perils, man-made perils including terrorism and longer duration bonds. It added that it also expects an increased usage of insurance-linked securities (ILS) by corporate sponsors.

The briefing reported that the fourth quarter of 2014 saw a flurry of activity that resulted in full year 144A property and casualty (P&C) catastrophe bond issuance exceeding $8 billion, an industry record. This followed one of the slowest third quarters to date for 144A P&C catastrophe bond issuance.

In addition to 144A P&C transactions, the fourth quarter of 2014 was an active one for the private catastrophe bond market. As of December 31, 2014 approximately $561.5 million of limit was transferred to the capital markets via 17 transactions. These figures represent a 210 percent increase in the notional amount of limit placed year-over-year, and a 183 percent increase in the number of transactions year-over-year.

“Sponsors took advantage of strong investor demand as more than 70 percent of deals coming to market in 2014 settled at greater notional value than initially expected,” said Cory Anger, global head of ILS structuring, GC Securities.