June 6, 2017

Cat bond issuance reaches $8.15bn in 2017, market hits $29bn record

The catastrophe bond and insurance-linked security (ILS) market has reached another milestone as of the 1st June 2017, with issuance for the year now at $8.15 billion which takes the size of the outstanding cat bond market to a new record at over $29 billion.

The cat bond market continues to set new records in 2017, with the $8.15 billion of issuance seen so far ensuring that this year will be at least the third most issuance in the market’s history.

The figure means new second-quarter and half-year issuance records for the catastrophe bond market, far exceeding any previous years issuance totals by this date.

Following on from a record first-quarter for the catastrophe bond market, the pace of issuance continues to be rapid and we’ve now seen the most transactions by this point of the year ever.

The size of the market has also reached another milestone high, passing $29 billion of catastrophe bond risk capital outstanding for the very first time.

Catastrophe bonds issued and outstanding as at 1st June 2017

Catastrophe bonds issued and outstanding as at 1st June 2017

The market has been helped to its record size by the completion of a number of new cat bond deals in the last few days,

Recently closed transactions include a $400m Alamo Re 2017 from the Texas Windstorm Insurance Association (TWIA), a $200 million Sanders Re cat bond from Allstate, a $190 million Riverfront Re cat bond from first time sponsor Great American Insurance Group and a $100 million Casablanca Re cat bond from Avatar Property and Casualty Insurance Company, another first time sponsor. Details on all of these transactions are available in the Artemis Catastrophe Bond Deal Directory.

The brisk pace of catastrophe bond issuance has been helping some ILS investment managers to put new capital to work, albeit not in a significant manner yet. We understand from investor sources that a number of new investors have also entered the market thanks to the greater availability of cat bond assets to invest in.

With two new catastrophe bonds still in the market, which could bring around $550 million of additional risk capital to the market by the end of June, and $1.33 billion of cat bonds set to mature by the end of the half-year, we can estimate that 2017 issuance will likely hit around $8.7 billion by the end of Q2 and the outstanding market could end the quarter near $28.25 billion, which would indicate very solid growth for 2017 so far, especially given the high levels of maturities witnessed.

With around $8.7 billion of cat bond issuance now in sight for the first-half of 2017, the magic $10 billion seems eminently achievable by year-end.

With only just over $1.3 billion of cat bonds set to mature in the second-half of the year, thoughts must now turn towards the outstanding market seeing a record $30 billion in size by year-end. That would be a real signal of a market that is still achieving steady and sustainable growth.

As capital market investors continue to demonstrate their appetite for the returns achievable through investments in reinsurance risk, the cat bond market is benefiting as it offers an easily tradable, liquid asset which suits many institutional investors and ILS fund managers.

To read more articles like this one, subscribe to Artemis’ real-time email alerts in order to always keep up to date with the developing ILS and alternative reinsurance market.

Artemis tracks the development of catastrophe bonds and the insurance-linked securities (ILS) trade, with every transaction recorded in their Deal Directory, a Market Dashboard and their charts, data & analytics enabling users to analyse cat bond issuance and the market’s history more closely.

Note: Artemis’ data on catastrophe bond issuance includes every private transaction they can source information on, as well as full 144A broadly marketed issues. Hence Artemis’ figures are typically higher than those quoted by broker reports, but this provides a more holistic look at market activity.

 

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