Tom-Johansmeyer, ISO

It was a record year for Insurance Linked Securities in 2014, and new approaches to alternative capital are have emerged. Here Tom Johansmeyer, AVP Reinsurance Services at ISO, speaks with about Cat Bond Lite at the recent IRLS Conference in New York.

According to Mr. Johansmeyer, Cat Bond Lite “is a streamlined way to transfer risk in a securitized format.” It is similar to larger 144a deals that have higher limits along with due diligence and risk modeling. Cat Bond Lite is a slimmed down approach with the same disclosure, but not the same strict process required of larger Cat Bonds.

While Cat bonds do not have to be disclosed, Mr. Johansmeyer says “we know of 10 publicly revealed private Cat Bond Lite transactions, which totaled $224 million last year.” Cat Bond Lite reduces frictional costs and allows for a more nimble stance in risk transfer. “If you want to lower your frictional costs, increase your speed and flexibility…Cat Bond Lite looks like it works well …”

For the first quarter of 2015, there have already been $200 million in publicly revealed limits, of which 75% uses PCS Cat Loss Index. Mr. Johansmeyer sees Cat Bond Lite as a strong area of growth. “If everything renews as everyone expects, then you are looking at significant year over year growth, and we are not even outside of Q1 yet.”

For more from SIFMA’s ILRS Conference, visit the On Demand Library.

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