Q3 cat bond issuance down 19%: Willis report

Catastrophe bond issuance for the third quarter of 2015 was roughly double that of Q3 2014, though year-to-date issuance was down 19% year over year, Willis Capital Markets and Advisory (WCMA) said in a recent report.

In its insurance-linked securities (ILS) Market Update – titled Catastrophe Bond Issuance is Down: The New Future or Just a Head Fake? – WCMA reported non-life cat bond issuance was US$4.8 billion in the first three quarters of this year, down 19% from US$6 billion during the same period in 2014.

“One could argue that a more permanent shift away from the most liquid ILS products has occured,” Willis said in the report, released Tuesday. “First, the market has matured. As a result, those end investors (mostly pension funds) who have supported ILS funds for some time have become increasingly comfortable with reinsurance risk. This increased comfort has made them more wiling to accept some of the purported liquidity of collateralized re within the ILS funds they back.”

Also, Willis reported that some ceding insurers “would prefer to have a narrower set of partners who will work with them across their program (cross subsidies) and across time through payback (arguably off balance sheet debt financing).

Q3 issuance was US$650 million this year, up from US$300 million last year.

“Last year the traditionally quiet third quarter had the lowest volume since 2010 when just one transaction came to market, State Fund’s Golden State Re II.”

WCMA reported there were three issuances in the third quarter of 2015.

Ursa Re Ltd. 2015-1, for US$250 million, was sponsored by California Earthquake Authority. It covers U.S. earthquake, and “provides protection on an annual aggregate basis through a three-year term.”

Acom Re Ltd. 2015-1, for US$300 million, also covers U.S. quake. It was sponsored by Kaiser Permanente and “will protect against West Coast earthquake on a per occurrence basis over a three year period,” WCMA reported.

“The trigger is based on a parametric ‘cat-in-a-box’ structure utililzing up to 430 predetermined box locations.”

Bosphorus Re Ltd. 2015-1, for US$100 million, covers earthquakes in Turkey. It was sponsored by TCIP.