2014 to end with record $8.718 billion ILS issuance, market at $25 billion

by Artemis on December 23, 2014

This year, 2014, is set to end with the highest annual insurance-linked securities (ILS) and catastrophe bond issuance total at $8.718 billion. That put’s the outstanding cat bond and ILS market at a new milestone, a record size of $25 billion.

Update 30th December 2014:

The emergence of two private cat bond transactions both facilitated by Hannover Re has added an additional $76m to our total for the year. We now record 2014 issuance as $8.794 billion, while the outstanding catastrophe bond & ILS market has reached $25.029 billion.

Original article:

That figure of $25 billion ($24.953 billion to be precise) is quite a stunning margin of growth over the course of 2014. At the end of 2013 the number, according to the Artemis Deal Directory, stood at $20.5 billion, so over the course of this year the cat bond and ILS market has grown by a very impressive $4.5 billion of reinsurance related securitised risk capital outstanding.

It was the completion of Tramline Re II, Amlin’s latest catastrophe bond, that took us to a year-end total of $8.718 billion. At the moment we know of no other cat bonds in the market, so unless a private deal appears before the end of the year (which has happened before) we expect that to be our total issuance figure for the year.

Catastrophe bonds & ILS issued and outstanding by year

Catastrophe bonds & ILS issued and outstanding by year (click for dynamic chart)

It is encouraging to see that as the total amount of ILS and alternative capital in the reinsurance market grows, the size of the catastrophe bond market is growing with it. This demonstrates the reliance that many are placing on cat bonds as a source of risk transfer, as proven by the many repeat sponsors that now tap the cat bond market on a regular basis for risk transfer.

Issuance in 2014 has been driven by four factors. Firstly market dynamics, the continued competitive pricing available in the catastrophe bond market, which is now often able to undercut traditional reinsurance pricing on certain risks and layers of programs.

Alongside that there has been an increased appreciation for where the true cost of ILS capital lies, enabling managers of ILS and third-party reinsurance capital to reduce their pricing while maintaining a margin on the majority of risks. This has assisted with keeping ILS and cat bonds particularly competitive in 2014.

The sector has made strides in reducing the gap between traditional reinsurance coverage and ILS coverage, by expanding the remit of cat bonds using features such as variable resets, inclusion of more unusual risks and other structural trends which help to make ILS or cat bonds a more attractive alternative.

Finally, the increasing interest in ILS and catastrophe bond, both as risk transfer tool and as investment. With sponsors, particularly first-time primary insurer sponsors, keeping deal-flow moving during the year, while interest from investors continues to increase and broaden significantly.

So pricing dynamics, cost-of-capital, market sophistication and appetite for risk transfer or risk investments are all helping this market to continue growing.

Artemis has tracked the catastrophe bond and ILS market throughout the year and our Deal Directory, listing every cat bond deal issued since the market began, has been used over the course of the year more than a quarter of a million times by tens of thousands of readers interested in the catastrophe bond and ILS market.

During 2014 we added a number of new features, including our much used ILS and Cat Bond Market Dashboard, which has proved popular with 100’s of readers using it every day. We also added our series of charts breaking down the outstanding cat bond market and other data points related to catastrophe bond structures.

Reports suggest that 2015 should see another strong year for catastrophe bonds and issuance of other insurance-linked securitisations, with brokers all referring to a strong pipeline of deals building for the first-half of next year. With around $4 billion or so of risk capital maturing in the first-half the market has a great opportunity to put this back to work and to encourage more new sponsors to market at the same time, which could result in another strong start to a year.

We will of course bring you details on every transaction we can source information on throughout the year and look forward to bringing new features which leverage our deal data in 2015.

We’d like to wish all of Artemis’ readers, partners and friends a very Happy Holidays and successful 2015!


Artemis Catastrophe Bond & ILS Market DashboardKeep abreast of the make-up of the catastrophe bond and ILS market with the Artemis Catastrophe Bond & ILS Market Dashboard. Designed to be a simple and effective tool which exposes the key data and statistics contained in the transactions found in our catastrophe bond & ILS Deal Directory.

View the current breakdown of the market in our range of charts, allowing you to analyse the cat bond market.

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