Munich Re forecasts $3B+ cat bond issuance for second quarter 2015

by Artemis on April 17, 2015

Global reinsurance firm Munich Re, the largest reinsurer in the world, said in its latest catastrophe bond and insurance-linked securities market report that it believes total Q2 2015 cat bond issuance could be “north of $3bn.”

With such a high volume of cat bonds having matured during the first-quarter of 2015 and another $1.5 billion approximately to mature in the second-quarter, Munich Re’s Risk Trading Unit believes that we could see some sponsors catching up on matured issuances in Q2 of this year.

Munich Re notes that while first-quarter issuance reached $1.7 billion by its numbers, which is lower than Artemis’ figure of almost $2.1 billion due to our inclusion of private cat bond deals, maturities outstripped issuance resulting in a shrinking of the outstanding catastrophe bond market.

Many of the maturing transactions have not been renewed, which has even left some big primary insurer sponsors outside of the cat bond market for now, but Munich Re believes that a number of these could come back to the sector in Q2 or future quarters.

“A large portion of the re-issuance backlog is likely to come to the market in the second quarter which traditionally, prior to the hurricane season, has the strongest placement activity,” commented Andreas Müller, who heads up the Risk Trading Unit at Munich Re.

That would be a welcome addition to what is already appearing to be a fairly brisk quarter, with now 8 transactions listed for the second quarter in the Artemis Deal Directory.

With lower maturities expected in Q2, and deal flow seemingly brisk, the outstanding catastrophe bond and ILS market has a good chance of returning to outright growth and to reach another new record size by the mid-point of 2015.

Munich Re said that it expects “some sponsors with non-renewed first quarter maturities to catch up on their cat bond issuance during the second quarter.”

In terms of a forecast for second quarter 2015 catastrophe bond issuance, Munich Re said that this could “result in a total Q2 issuance volume north of $3bn.”

That would take first half cat bond issuance to at least $5 billion, in Artemis’ view, and at least $4.7 billion by Munich Re’s reckoning. While this may not be sufficient to beat 2014’s record, it would signify another healthy year with further outright growth in terms of risk capital outstanding.

As the chart below shows though, Q2 2015 issuance will have to go some way to beat the record quarter we saw last year.

Q1 & Q2 ILS and cat bond issuance volume

Q1 & Q2 ILS and cat bond issuance volume - Source: Munich Re

You can access the full Munich Re Q1 ILS market report via its website here.


Artemis’ Q1 2015 Catastrophe Bond & ILS Market Report – The biggest first quarter ever

Catastrophe bond market reportWe’ve now published our Q1 2015 catastrophe bond & ILS market report.

This report reviews the catastrophe bond and insurance-linked securities (ILS) market at the end of the first-quarter of 2015, looking at the new risk capital issued and the composition of the cat bond & ILS transactions completed during Q1 2015.

Download your copy here.

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