2013 catastrophe bond & ILS issuance hit $7.64 billion

by Artemis on January 2, 2014

The total volume of catastrophe bonds and insurance-linked securities (ILS) issued during 2013 and listed in the Artemis Deal Directory hit $7.6417 billion by the end of the year as a flurry of deals in December closed the year at an all time high of $20.5 billion.

With the completion of the last catastrophe bond transactions of 2013, QBE’s VenTerra Re Ltd. (Series 2013-1) and Argo’s Loma Reinsurance (Bermuda) Ltd. (Series 2013-1), on the 30th of December 2013 catastrophe bond and ILS issuance jumped by another $422m taking the annual total recorded by Artemis to $7.6417 billion.

We make this the second highest annual issuance volume after 2007, but some others may call it the highest ever depending on how certain deals are accounted for. For example Swiss Re reports 2007 issuance as $8.24 billion, where as Fitch Ratings has it as $7.6 billion. So 2013 is certain to be reported as the second highest level of issuance as well as the highest, depending on whose numbers you are studying.

One area that 2013 certainly broke a record was in the actual number of catastrophe bond and ILS transactions brought to market. 2013 saw 36 individual transactions recorded in the Artemis Deal Directory, giving the year an average deal size of approximately $212.3m. This is the highest number of issuances we’ve ever recorded in a single year, with 2007 coming second at 31 transactions recorded.

As ever the majority of the transactions issued in 2013 were natural peril catastrophe bonds, making up 34 of the 36 transactions, with the other two being an extreme mortality deal and a medical benefit ratio-linked ILS transaction. U.S. wind was the focus, as is to be expected, with 24 of the 36 transactions having direct U.S. hurricane or named storm exposure and one other having exposure to U.S. wind via its provision of storm surge protection in New York (MetroCat).

In total, just over $5.1 billion of the $7.6417 billion of risk capital issued in catastrophe bond and ILS deals in 2013 has some level of exposure to U.S. wind. That’s just under 68% of total 2013 issuance, which is a typical amount of exposure to U.S. wind and shows that while the market saw diversification opportunities in 2013, the focus continued to be on U.S. wind.

The chart below shows annual catastrophe bond and ILS issuance volume as well as the number of transactions issued each year. The growth since 2008 is particularly impressive.

Catastrophe bond & ILS issuance by year

Catastrophe bond & ILS issuance volume and number of transactions by year

2013 saw catastrophe bond issuance spread across the entire year, with only two months seeing no transactions complete (February and November). April and May were the peak months in terms of issuance volume with December coming a close third thanks to the final flurry of transactions offered as we approached the end of year renewals.

This chart shows catastrophe bond and ILS issuance volume by month as well as the number of transactions issued.

2013 catastrophe bond & ILS issuance by month

2013 catastrophe bond & ILS issuance and number of transactions by month

2013 was only the second year ever which saw over $1 billion of issuance in each quarter, with only 2007 having seen this level of consistency in quarterly issuance before. Q2 saw the highest level of issuance, with $2.5535 billion of risk capital issued, followed by Q4 at $1.877 billion, Q3 at $1.68 billion and Q1 at $1.5312 billion.

The high level of issuance seen during Q3 was particularly unusual in 2013, as that quarter is right in the middle of the U.S. hurricane season and tends to see a slowdown in catastrophe bond issuance. Not last year though, with a number of cat bonds with exposure to U.S. wind being issued successfully showing a new level of acceptance of risk and appetite for new deals among ILS investors.

Catastrophe bond & ILS issuance by quarter

Catastrophe bond & ILS issuance by quarter

The catastrophe bond and ILS market finished off 2013 on a high, with the size of the outstanding cat bond and ILS market closing out the year at just over $20.5 billion. Three maturing transactions rolled off risk at the end of the December, taking $356m out of the market, but thanks to the strong December flow of new ILS deals the market grew again to finish the year at an all time high.

Catastrophe bond & ILS volume issued and outstanding by year

Catastrophe bond & ILS volume issued and outstanding by year - Source: Artemis & Swiss Re

Looking ahead, 2014 sees attractive issuance conditions continue with investor appetite for new catastrophe bond and ILS risk capital remaining high. The market is still well-capitalised and there is still excess appetite from investors hoping to come into the market, but for the moment issuance is still not sufficient to absorb all of this demand. Some ILS investment managers remain closed to new inflows of capital, something that may change as we move through 2014 if deal-flow is sufficiently strong enough.

Every catastrophe bond and ILS deal issued in 2013 and included in our Deal Directory is listed below. In total Artemis recorded $7.6417 billion of ILS issuance from 36 transactions, giving an average deal size of approximately $212.3m. That’s well up on last years totals of $6.339 billion from 29 deals and an average deal size of approximately $219m.

We look forward to keeping you abreast of any, and all, developments in the cat bond and ILS market as we move through 2014. Remember, for full details of every catastrophe bond & ILS transaction since the market began just visit our Deal Directory.

Issuer Cedent Risks / Perils covered Size Date
Windmill I Re Ltd. (Series 2013-1) Achmea Reinsurance Company N.V. Dutch windstorm €40m Dec 2013
Queen City Re Ltd. (Series 2013-1) American Modern Insurance Group, Inc. U.S. named storms $75m Dec 2013
VenTerra Re Ltd. (Series 2013-1) QBE Insurance Group Ltd. subsidiaries U.S. earthquake, Australia cyclone, Australia earthquake $250m Dec 2013
Loma Reinsurance (Bermuda) Ltd. (Series 2013-1) Argo Group Tropical cyclones, U.S earthquake, U.S. severe thunderstorm $172m Dec 2013
Tradewynd Re Ltd. (Series 2013-2) AIG U.S., Caribbean, Gulf of Mexico named storms. U.S., Canada earthquake $400m Dec 2013
Residential Reinsurance 2013 Ltd. (Series 2013-2) USAA U.S. tropical storms, U.S. earthquakes, severe thunderstorms, winter storms and wildfires in California $150m Dec 2013
Galileo Re Ltd. (Series 2013-1) Catlin U.S. named storms, U.S. earthquake, Canada earthquake, European windstorm $300m Oct 2013
Calypso Capital II Ltd. (Series 2013-1) AXA Global P&C European windstorm €350m Oct 2013
Atlas IX Capital Limited (Series 2013-1) SCOR Global Life SE Extreme mortality $180m Sep 2013
Nakama Re Ltd. (Series 2013-1) Zenkyoren Japan earthquake $300m Sep 2013
Northshore Re Limited (Series 2013-1) AXIS Capital Holdings Ltd. subsidiaries U.S. hurricane, U.S. earthquake $200m Aug 2013
MetroCat Re Ltd. (Series 2013-1) First Mutual Transportation Assurance Co. Storm surge (named storm induced) $200m Jul 2013
Sullivan Re Ltd. (Series 2013-1) New Jersey Manufacturers Insurance Group U.S. named storms $60m Jul 2013
Mona Lisa Re Ltd. (Series 2013-2) Renaissance Re and DaVinci Re U.S. and Puerto Rico named storms. U.S. earthquakes $150m Jul 2013
Mythen Re Ltd. (Series 2013-1) Swiss Re U.S. hurricane $100m Jul 2013
Tradewynd Re Ltd. (Series 2013-1) AIG U.S., Caribbean, Gulf of Mexico named storms. U.S., D.C., Canada earthquake $125m Jul 2013
Green Fields II Capital Ltd. (Series 2013-1) Groupama European windstorm (France only) €280m Jul 2013
Ibis Re II Ltd. (Series 2013-1) Assurant U.S. hurricane $185m Jun 2013
Queen Street VIII Re Ltd. Munich Re U.S. hurricane, Australia cyclone $75m Jun 2013
Tramline Re II Ltd. (Series 2013-1) Amlin AG U.S earthquake, Canada earthquake $75m Jun 2013
Oak Leaf Re Ltd. (Series 2013-1) Unknown Florida based cedant Florida hurricanes $30.49m Jun 2013
Residential Reinsurance 2013 Ltd. (Series 2013-1) USAA U.S. hurricane, U.S. earthquake, U.S. severe thunderstorm, U.S. winter storm and California wildfire $300m May 2013
Blue Danube II Ltd. (Series 2013-1) Allianz Argos 14 GmbH U.S., Caribbean, Central American, Mexican hurricane. U.S., Canadian earthquake $175m May 2013
Sunshine Re Ltd. (Series 2013-1) Florida Municipal Insurance Trust Florida hurricanes $20m May 2013
Long Point Re III Ltd. (Series 2013-1) Travelers U.S. hurricane (Northeastern U.S. states only) $300m May 2013
Armor Re Ltd. (Series 2013-1) American Coastal Insurance Company Florida hurricanes $183m May 2013
Pelican Re Ltd. (Series 2013-1) Louisiana Citizens Louisiana hurricane $140m May 2013
Sanders Re Ltd. (Series 2013-1) Allstate U.S. hurricane, U.S. earthquake $350m May 2013
Bosphorus 1 Re Ltd. Turkish Catastrophe Insurance Pool Turkey earthquake $400m Apr 2013
Tar Heel Re Ltd. (Series 2013-1) North Carolina JUA / IUA North Carolina hurricane $500m Apr 2013
Caelus Re 2013 Ltd. (Series 2013-2) Nationwide Mutual Insurance Co. U.S. hurricane, U.S. earthquake $320m Apr 2013
Merna Re IV Ltd. (Series 2013-1) State Farm U.S. earthquake (New Madrid region) $300m Apr 2013
Everglades Re Ltd. (Series 2013-1) Citizens Property Insurance Florida hurricanes $250m Mar 2013
Caelus Re 2013 Ltd. (Series 2013-1) Nationwide Mutual Insurance Co. U.S. hurricane, U.S. earthquake $270m Mar 2013
Vitality Re IV Ltd. (Series 2013-1) Aetna Life Insurance Company Medical benefit claims levels $150m Jan 2013
Skyline Re Ltd. (Series 2013-1) The Cincinnati Insurance Company New Madrid earthquake and severe thunderstorms $61.2m Jan 2013

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