In a recent A.M Best video interview, Tom Johansmeyer, AVP, Reinsurance Services at ISO, discusses property and catastrophe bond and cat bond lite transactions in 2014 and the transition to 2015. The video also includes Asha Attoh-Okine, managing senior financial analyst of insurance -linked securities an A.M Best Company.
Catastrophe bonds continued to grow in 2014. There was a 15 percent increase over 2013, and the market continued to be dominated by property/catastrophe cat bonds. Johansmeyer says that there was $7.8 billion in original issuance in 2014 — another record for cat bonds and an 8 percent increase over the previous year. He explains that though we saw an increase in issuance, the number of transactions completed declined from 32 in 2013 to 24 in 2014.
In addition to catastrophe bonds, the market also saw further adoption of cat bond lite — smaller, more tactical transactions with less onerous regulatory requirements. Johansmeyer describes them as “smaller transactions that are executed quickly and with lower frictional costs, usually for some sort of state capital management objective.”
Johansmeyer sees interest in cat bond lite growing this year: “At the beginning of the year, we can already see cat bond lite as forming into yet another trend for 2015. So far, five deals have been completed and publicly revealed.”