2015 catastrophe bond and ILS issuance passes $4 billion

by Artemis on May 14, 2015

Yesterday’s completion of the Texas Windstorm Insurance Association’s (TWIA) latest use of catastrophe bonds for reinsurance, the $700m Alamo Re Ltd. (Series 2015-1), has taken issuance of new cat bonds and insurance securitizations past the $4 billion mark for the first time in 2015.

Catastrophe bond & ILS issued & outstanding at May 20152015 issuance now sits at a healthy $4.058 billion, with at least another $650m of new issuance waiting to be completed.

Meanwhile the outstanding catastrophe bond and ILS market has reached $23.904 billion, which while still down on the record $25 billion seen at the end of 2014, is impressive given the high volume of maturities seen so far this year.

Issuance remains easily on track to reach $8 billion+ in 2015, with the total already half way there. In fact, if some of the remaining cat bonds that are being marketed in advance of the June renewal upsize we could see $5 billion by mid-year 2015.

Catastrophe bonds and ILS issued and outstanding by year

Catastrophe bonds & ILS issued and outstanding by year - Click for interactive chart

With the completion of its latest catastrophe bond, TWIA now benefits from reinsurance protection provided by $1.1 billion of cat bond risk capital outstanding. That’s a significant move for the residual market insurer, which has actually put TWIA into fourth place in our cat bond sponsors leaderboard.

The top ten catastrophe bond sponsors in the outstanding ILS market

The top ten catastrophe bond sponsors in the outstanding ILS market - Click for interactive chart

According to data from the Artemis Catastrophe Bond Deal Directory, the rolling twelve month catastrophe bond and ILS issuance total is continuing at a similar pace to that seen last year, with $8.9 billion of issuance in the last twelve months to 14th May.

That’s an impressive continuation of the strong issuance seen in 2014, but it should also be noted that this is steady growth we are seeing in cat bonds and ILS, which should be sustainable, especially as pricing is clearly leveling out for many risks.

On the topic of pricing, 2015 cat bond issuance to date shows a slight uptick in the average coupon paid to investors, but also in the average expected loss. The results of which is a further slide in the average multiple paid to investors so far in 2015, compared to previous years issuance.

Average coupon and expected loss of catastrophe bond and ILS issuance by year

Average coupon, expected loss of catastrophe bond and ILS issuance by year - Click for interactive chart

However evidence continues to build that catastrophe bond pricing has reached a floor and Artemis has actually recorded an uptick of 1.89% in pricing during the second-quarter so far, based on final coupon pricing versus the initial mid-point of guidance for each tranche of notes issued.

That reflects investors refusing to meet the low pricing often offered as initial guidance, preferring to opt for something in the upper end of the range. The majority of cat bonds issued have been pricing in the upper end of guidance for some months now.

So issuance remains very healthy and the market has reached $4 billion of issuance almost as quickly as last year. By the 14th May 2014 the annual cat bond and ILS issuance total had reached $4.25 billion, but that included the outsized $1.5 billion Everglades Re deal.

The level of issuance further demonstrates the acceptance of catastrophe bonds as reinsurance and retrocessional risk transfer tool. We continue to see new sponsor interest as well as new investors entering the space, which suggests that issuance should be able to keep up the pace required to get above $8 billion again by the end of the year.

Artemis Catastrophe Bond & ILS Market DashboardKeep up-to-date with the make-up of the catastrophe bond and ILS market using the Artemis Catastrophe Bond & ILS Market Dashboard, designed to be a simple and effective tool providing key data and statistics on the transactions contained in our catastrophe bond & ILS Deal Directory.

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

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