Fitch: Catastrophe Bond Issuance Expected to Remain Strong in 2016
Through the third-quarter of 2015, \\$5.5 billion of cat bonds have been issued, down from \\$6.2 billion during the same period of 2014. Repeat sponsors have replaced maturing issues and taken advantage of current favorable market conditions, but new sponsor issuance has been limited as other alternative risk transfer outlets remained strong options for cedants.
Issuance is likely to remain strong into 2016 as more than \\$7 billion of outstanding cat bonds will mature and are likely to be replaced in the next 15 months. Conditions remain favorable for new and returning sponsors; however, growth in total outstanding issuance will be limited as maturities offset much of the new issuance.
Fitch rated nine catastrophe bond (12 separate tranches) transactions in the 15-month period between April 2014 and July 2015, representing over \\$3 billion in par value with a range of ratings between 'Bsf' and 'BB+sf'. Fitch expects that peak tail risks within sponsors' reinsurance programs will continue to remain of interest to investors and a source of growth in the industry, but that cat bonds will continue to be structured with risk profiles consistent with non-investment-grade ratings.