2014 catastrophe bond issuance beats 2013, on track for record year

The total amount of catastrophe bond issuance in 2014 has now overtaken the 2013 full-year figure for the first time. 2013 issuance reached $7.642 billion, but the 2014 total thanks to the completion of USAA’s latest cat bond yesterday has now hit $7.643 billion.

USAA’s $100m Residential Reinsurance 2014 Ltd. (Series 2014-2) completed and the notes were listed on the Cayman Islands Stock Exchange on yesterday, Tuesday 3rd December. That additional $100m has helped 2014 cat bond issuance exceed the level set over the full-year of 2013 to $7.643 billion and puts it on track to reach a new record by the end of the year.

Catastrophe bond & ILS issuance and outstanding by year (Click for full, dynamic chart)

2013 saw the second highest level of primary catastrophe bond and insurance-linked securities (ILS) issuance on record, after 2007 which remains the highest single year on record. However 2014 is now set to surpass the previous record and it is now almost guaranteed that 2014 will become the single biggest year of cat bond issuance on record.

Based on transactions we have listed in the Artemis Deal Directory, but which are yet to complete, it currently looks like we will be able to add another $900m, at least as there is still time for further upsizing, to the current total by the end of 2014.

That would take us to at least $8.543 billion for the full-year catastrophe bond and ILS issuance total for 2014. The figure we have for the previous record year of 2007 is $8.242 billion, so we could beat the record by at least $300m by the time this year ends.

Of course, earlier this year we had hoped to see a much higher issuance figure for the full-year of 2014, particularly after Q2’s record quarterly cat bond issuance of $4.634 billion took 2014’s first-half total to another record of $6.219 billion of new catastrophe bond and ILS risk capital.

But the slow down in issuance in Q3 2014 thwarted all chances of a $10 billion year (unless something miraculous happens by year-end). However, a record is a record and the catastrophe bond market continues to exhibit clear signs of ongoing growth and maturity, as more capital looks to be put to work, deal structures continue to evolve, new sponsors continue to access the market and new perils are added to the market’s roster.

In terms of risk capital outstanding, by our reckoning there is only another $78m of maturing cat bonds due before the end of the year. So, from our current figure for the outstanding catastrophe bond and ILS market ($23.931 billion with the addition of USAA’s Residential Re 2014-2), taking into account the upcoming maturities and adding on the additional $900m of issuance yet to complete, we see the cat bond market with an outstanding size of $24.753 billion or more by year-end.

That would be another record end to the year and a clear $4.2 billion+ of market growth since the end of 2013 (we sized the outstanding market at $20.5 billion at the end of 2013), impressive by anyone’s standards. Could $25 billion be possible? Perhaps, if Zenkyoren’s latest Nakama Re cat bond upsizes considerably, we’ll keep you posted.