BNY Mellon has been ranked as the leading global trustee for catastrophe bonds, commonly referred to as “cat bonds,” issued in 2015.
BNY Mellon’s market share rose to 52 per cent by dollar volume, up from 36 percent in 2014, according to research compiled internally using data from Artemis, a leading provider of information on the insurance linked securities (ILS) and cat bond market.
For 2015, BNY Mellon acted as trustee for 52 percent of the USD7.8 billion in cat bonds issued globally, which are financial instruments that provide reinsurance capacity for catastrophic events such as earthquakes, wind damage and floods.
“Our growing volume and market share spotlights the benefits clients are receiving from our continuing service improvements and strategic commitment to this market,” says Kathleen Scott, head of BNY Mellon’s US corporate and insurance business in the Corporate Trust group. “We have the capabilities and expertise to support new entrants to the cat bond market. New sponsors include corporations that are joining traditional insurance and reinsurance companies that see cat bonds as an increasingly attractive way to hedge against risk.”
Over the last 10 years there have been nearly USD56 billion of cat bonds issued, propelling the outstanding volume of bonds in the ILS and cat bond market to grow from USD9 billion to nearly USD26 billion, according to Artemis. Scott said she expects the volume to continue growing in 2016, driven by higher demand for investment risk diversification from investors and increased need for alternative capital sources from sponsors.
Harold Fudali, head of BNY Mellon’s US sales and relationship management for corporate and insurance businesses in the Corporate Trust group, says cat bonds also have become more appealing to new sponsors, such as corporations, as their costs continue to decline due to issuance efficiencies. He said investors are drawn to the investment yield potential which is uncorrelated to other asset classes.
Cat bonds are designed to transfer a specified set of insured risks, such as natural perils, from sponsors to the capital markets. BNY Mellon acts as a trustee, paying agent and collateral agent to administer a wide-range of ILS transactions, including cat bonds, sidecars, collateralised reinsurance contracts and ILS funds.
BNY Mellon is a leading provider of corporate trust services to the debt capital markets, offering customized and market-driven solutions to investors, bondholders and lenders. As of 31 December, 2015, BNY Mellon Corporate Trust served as trustee and/or paying agent on more than 58,000 debt-related issues globally. The corporate trust business utilises its global footprint and expertise to deliver a full range of issuer and related investor services including trustee, paying agency, fiduciary, escrow, and other financial services. The business administers a wide array of assets and types of programs to multinational corporations, financial institutions, governments and their agencies, and the banking, securities, and insurance industries.