ILS market experiences quiet Q3 2017, claims PCS

The ILS market has undergone a quiet third quarter of this year, according to a new report from Verisk subsidiary Property Claim Services (PCS).

The report, Bigger and More Mature: PCS Q3 2017 Catastrophe Bond Report, points out that catastrophe bond issuance in the third quarter of 2017 was quiet, and that this is because, except in years where second quarter transactions have spilled over to July, this tends to be the normal state of affairs for that period.

According to PCS, sponsors completed two catastrophe bonds in the third quarter, resulting in $460 million in new limit and bringing the year’s total issuance to nearly $9.3 billion, which for the year to date, is a record.

PCS also points out that because of the first half of 2017 representing the busiest full issuance year in catastrophe bond market history, each subsequent transaction has been pushing the market into record territory.

However, issuance activity isn’t what made the third quarter interesting this year, rather it’s been the potential for the catastrophe bond market to see claims.

“Two significant hurricanes made landfall in the US—with Harvey initially making landfall in Texas and Irma striking the coast of Florida,” said the report.

“Both storms ultimately moved inland and affected several states (detailed information is available in the PCS catastrophe bulletins associated with each event).”

While big storms and issuance activity tend to garner the most focus, PCS pointed out that it’s important to note new signs of maturation in the ILS sector. In addition, following the second-quarter launch of PCS Global Marine and Energy, the first industry loss warranty (ILW) to use this new service as a trigger was completed in the third quarter of 2017.

Looking at the transactions in more detail, PCS said that insurers and reinsurers sponsored approximately $9.3 billion in catastrophe bonds in the first nine months of 2017, up 148 percent year over year. Sponsors completed 31 transactions—up from 16 in the first nine months of 2016.

Average transaction size rose to nearly $300 million, a year-over-year increase of 28 percent.

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