Catastrophe bond volume drops in second quarter

Catastrophe bond issuance for the second quarter was lower than in the past two years, according to a report released Thursday by GC Securities.

The new Catastrophe Bond Update: Second Quarter 2015 report by the MMC Securities Corp. division showed that for the second quarter of 2015, aggregate volume dropped to $2.45 billion, down in the same quarter from $3.30 billion 2013 and $4.49 billion in 2014.

The decline, however, was partially offset by private catastrophe bonds, according to the report.

“The investor base also supported significant growth in private catastrophe bonds, as issuances rose to their highest levels ever. In total, nine such deals came to market in the second quarter, representing $556.3 million of risk capital and outpacing growth in the 144A catastrophe bond market,” said New York-based GC Securities in its update.

The second quarter also saw some diversification of perils.

Panda Re Ltd. Series 2015-1 notes represented the first bond to provide protection against a Chinese peril and the first ILS transaction issued by a Chinese sponsor, the report noted.

“The Series 2015-1 notes provide China Re retrocession protection against earthquake-related losses in China on an indemnity basis,” the report said.

“We continue to see high demand among ILS investors for nontraditional diversifying exposures, which has encouraged new sponsors to evaluate alternative capital for protection in new regions not currently accessing the alternative capital and catastrophe bond markets,” Cory Anger, global head of ILS structuring, GC Securities, said in the statement.