Despite the decline in 144A cat bond issuance in 2019, Cory Anger, managing director, GC Securities, a division of MMC Securities LLC and affiliate of Guy Carpenter is encouraged that issuance activity “will resume and be robust”.

“The decline in the 144A cat bond issuance in 2019, while it’s been lower than 2017 and 2018, is actually still higher than in 2016 and most years prior to that,” she told The Insurer.

“The issuance this year has been very orderly and matching the maturities as they’re occurring, such that we’re only down about 1.5% in outstanding 144A cat bond capital as of August 31, 2019,” she added.

While much of future issuance activity will be subject to any loss activity that happens for the remainder of 2019, Anger told The Insurer that GC Securities has “a very nice, defined pipeline” growing for new issuance for the rest of the year, as well as for the first half of next year.

Speaking to The Insurer on the terrace of Hôtel Metropole in Monte Carlo, Anger discussed some of the lessons the industry has learned from the trapped collateral that was witnessed following the 2017 and 2018 losses.

“The 2017 and 2018 losses have been a reminder to the end source money in the ILS space that losses do happen,” she said. “It also reminds investors of the loss development pattern for these types of losses. It’s been a good opportunity for end source money to evaluate how they’re allocating capital to the ILS space.

“The trapped capital concept has actually allowed both end source money and the managers who might be managing it on behalf of the end source money to evaluate the forms [of ILS] that they invest in and the need for liquidity,” she added.

Anger said much of the discussion over 2019 has been around allocation and how end source money is being allocated between side cars, collateralised reinsurance, cat bonds (both public-style cat bonds and private-style cat bonds).

On the subject of structural innovation, Anger said this is a “key point in the ILS market”.

In spite of the significant loss years of 2017 and 2018, structural innovations continue to launch in the market, even if they have slowed a little bit, Anger told The Insurer.

“This year we saw the first terrorism only cat bond that was also the first British pound denominated cat bond, which has been very exciting to see those developments,” she said.

“In 2018 we saw a number of amazing ‘first of its type’ transactions where we saw third-party liability wildfire risk securitised for the first time and US flood risk securitised for the first time.”

She added: “While we have seen the terrorism transaction [in 2019], it does ebb and flow depending on market conditions but [innovation] is a fact of this market and I expect innovations to continue not only in 2020, but maybe we’ll see a couple in the remainder of 2019.”