PCS triggers used in 50% of applicable Q1 catastrophe bonds

by Artemis on April 2, 2014

The volume of catastrophe bonds issued during the first-quarter of 2014 which utilised data from Property Claim Services (PCS) within their triggers totalled $465m, accounting for 50% of the applicable deals issued.

Based on PCS’ calculation of total catastrophe bond issuance for Q1 2014, which only includes natural catastrophe bonds and excludes privately transacted or cat bond lite deals, its data was used in 3 out of the 6 new cat bond transactions PCS counted (details on every transaction can be found in the Artemis Deal Directory).

PCS put total issuance for Q1 at $1.2 billion from 6 catastrophe bond transactions. 5 of those new cat bonds included U.S. perils, accounting for $965m of the risk capital issued. PCS triggers were used in 3 cat bonds during the quarter, accounting for $465m of the risk capital issued.

So PCS triggers were used in 50% of the deals that it counts as having come to market during Q1, or 39% of the total risk capital issued, or perhaps more accurately 48% of the U.S. peril linked risk capital issued, as PCS only covers the United States to date.

For PCS this is a significant uplift on the first-quarter of 2013, when there were no transactions issued which used PCS data within the trigger.

PCS first-quarter 2014 catastrophe bond issuance statistics

PCS first-quarter 2014 catastrophe bond issuance statistics

PCS notes in its first-quarter 2014 catastrophe bond report which it published today, that while Q1 has seen strong issuance it is difficult to forecast whether this momentum will continue through the remainder of 2014 to make a new annual issuance total record achievable.

One of the cat bond transactions which used a PCS trigger uses the PCS Catastrophe Loss Index, Queen Street IX Re Ltd., while the other two used PCS data as catastrophe designation for an indemnity deal, East Lane Re VI Ltd. and Riverfront Re Ltd..

PCS’ catastrophe bond market report discusses the diversity of transactions issued, with international risks including Australian cyclone and Japanese earthquake, new sponsors such as American Strategic Insurance Group and Great American Insurance Group with Gator Re Ltd. and Riverfront Re Ltd. and the growing number of cat bond lite issues.

The report also includes updated trends that PCS tracks in the catastrophe bond market, one of which is the increasing use of catastrophe designation for indemnity cat bond deals.

PCS explained; “The independence and discipline inherent in the use of a third party for catastrophe designation can be attractive to investors and make it easier to analyze capital allocation opportunities. PCS catastrophe designation can be particularly useful for such perils as wildland fire, thunderstorm, and winter storm, where no other organization is available to provide an objective third-party designation (such as NOAA for hurricanes).”

The use of catastrophe designation as a way to identify whether a catastrophe event is of a certain severity and should qualify as a loss under the terms of indemnity cat bond deals looks set to continue.

You can download a copy of the full report from PCS via its website.

Read Artemis’ article on the record first-quarter 2014 catastrophe bond issuance, published yesterday.

Find details of every catastrophe bond issued so far in 2014 in our Deal Directory.

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