According to various reports across the industry, $500 million in private catastrophe bonds came to market last year, nearly half of them publicly announced. In 2015, approximately $200 million in "cat bond lite" transactions were completed in the first quarter alone.
The rapid growth in adoption of the cat bond lite structure suggests that the speed, flexibility, and tactical benefits are resonating with the insurance linked securities (ILS) community. Further, the relatively small amounts of risk transferred through cat bond lite transactions could attract new participants, risk-bearer types, and regions.
Cat bond lite could become an important risk and capital management tool for the ILS sector. But it's still new - and more innovation could be on the way. To get started, this article highlights seven important reasons for you to understand cat bond lite.