Investment management and investment services banking group BNY Mellon increased its catastrophe bond market share during 2015, acting as a global trustee for 52% of transactions by dollar volume, up from 36% in 2014.
Utilising data from the Artemis Deal Directory, BNY Mellon states that throughout last year it was trustee to just over half of the $7.8 billion in globally issued catastrophe bonds, so roughly $4 billion, a 16% increase on its share in terms of dollar volume from the previous year.
Kathleen Scott, Head of BNY Mellon’s U.S. corporate and insurance business in the Corporate Trust group, said; “Our growing volume and market share spotlights the benefits clients are receiving from our continuing service improvements and strategic commitment to this market.”
The global insurance-linked securities (ILS) and catastrophe bond market has witnessed impressive growth in recent years, with BNY Mellon highlighting that over the last decade some $56 billion of cat bond issuance has taken place, helping the outstanding market grow from roughly $9 billion, to approximately $26 billion.
Scott predicts the sector to experience further growth in 2016, with a growing desire for “investment risk diversification” from investors, and a growing need among sponsors to source alternative capital.
Furthermore, as investors and sponsors increase their sophistication of the asset class, and the wider insurance and reinsurance markets increase their acceptance and understanding of ILS and cat bond solutions, continued market growth during 2016 wouldn’t be too surprising.
“We have the capabilities and expertise to support new entrants to the cat bond market. New sponsors include corporations that are joining traditional insurance and reinsurance companies that see cat bonds as an increasingly attractive way to hedge against risk,” said Scott.
Head of BNY Mellon’s U.S. sales and relationship management for corporate and insurance businesses in the Corporate Trust group, Harold Fudali, explained how corporations and other new sponsors are increasingly looking to ILS structures owing to their extremely low correlation with the wider financial markets, and the fact that costs are declining owing to issuance efficiencies.
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