Cat bond lite issuance drives ILS market in Q3: PCS
Despite a quiet third quarter for the traditional catastrophe bond market, the cat bond lite market has continued to push ahead.
This is according to Property Claims Services (PCS), a division of Verisk Analytics, which explained that four transactions in the quarter led to approximately $94 million in new limits.
The triggers for three were undisclosed, with the fourth, Dodeka VII, using the PCS Catastrophe Loss Index.
Activity in July brought the year-to-date publicly revealed total to $490 million across 16 transactions, more than twice the the full-year 2014 total of $242 million.
“The continued growth of cat bond lite adoption indicates that the market has seen the value of securitisation for private transactions in conjunction with a streamlined issuance process. And the structure, rigour, and discipline involved in issuing through a cat bond lite platform may give this form of issuance an edge over private catastrophe bonds,” said PCS.
The report added that there is plenty of interest from potential new entrants, and the involvement of traditional reinsurers in the cat bond lite market this year suggests that 2016 could be bigger than 2015.
“So far, the use of cat bond lite has been complementary to the broader catastrophe bond market, a trend that’s likely to continue. The two types of securitised risk transfer address specific cedant needs (as do other forms of risk transfer, such as ILWs), demonstrating that ongoing innovation is providing a wider set of tools for better risk and capital management,” said PCS.
Outside of the cat bond lite market, sponsors completed three relatively small transactions for $600 million in new limit, bringing the year-to-date total to $4.7 billion.
