After 2015 began with record historical issuance levels in the first quarter, the fourth quarter of 2015 was dramatically different as only USD 1.425 billion of 144A property and casualty (P&C) catastrophe bonds benefiting five sponsors were completed. This represented the second lowest level since 2005 and the lowest level since 2009. One explanation for this development may be that sponsors who would ordinarily have been willing to issue in the fourth quarter of the calendar year may have had the flexibility to delay their issuance to the following first quarter in order to obtain best execution and/or avoid transaction crowding. We view sponsors’ willingness to focus on best execution rather than specific renewal dates (while still important for overall capital planning purposes) as a further sign of the maturity of the insurance-linked securities (ILS) space. The ILS space is perceived as performing in a manner similar to the broader capital markets with their availability of capital throughout the calendar year.
Despite a limited amount of capital placed in the quarter, one new sponsor (and the second corporate of the year), Amtrak’s captive Passenger Railroad Insurance Ltd. and four repeat sponsors (Everest Re, Munich Re, USAA and Zenkyoren) accessed the 144A catastrophe bond market.
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