Cat bond market hits record at $27.7bn, as 2017 issuance passes $4bn

by Artemis on April 13, 2017

The catastrophe bond market has reached a new all-time high at almost $27.7 billion of risk capital outstanding, as the settlement and closing today of reinsurance firm Everest Re’s $1.25 billion Kilimanjaro II Re 2017-1 and Kilimanjaro II Re 2017-2 take this year’s issuance to $4.031 billion.

Record catastrophe bond market sizeSo far, 2017 has seen a number of records broken in the catastrophe bond market as we covered in our recent first-quarter 2017 market report.

The records continue, as the significant volume of issuance seen in Q1 2017 ($2.76 billion) added to the completion of what is the second largest issuance of cat bonds ever, by Everest Re with the Kilimanjaro II Re deals, and one private cat bond through Eclipse Re, outstripped maturities to enable the outstanding cat bond market to achieve another high.

Sitting at $27.662 billion, to be precise, the catastrophe bond market has never had so much risk capital outstanding, by Artemis’ reckoning.

Impressively, the figure of $4.031 billion of cat bonds issued in 2017, up to and including the 13th April, is a significantly higher run-rate than we have ever recorded in our over two decades of tracking the market in cat bonds and insurance-linked securities.

In fact the second highest run-rate of cat bond issuance by this point of a calendar year was seen in 2015, when $2.34 billion of issuance was recorded by this date.

Appetite from sponsors to access collateralized reinsurance in a securitized form has continued to grow, while appetite from investors and ILS funds to allocate capital to the more liquid cat bond notes is also seemingly on the rise.

This has helped catastrophe bond pricing in 2017 to remain very competitive, meaning sponsors can secure reinsurance from the capital markets at rates akin to traditional coverage.

For the remainder of the second-quarter of 2017 there are just over $4 billion of outstanding cat bonds left to mature, which means despite the impressive run-rate to-date achieving outstanding growth is going to be hard.

There is currently just over $1.44 billion of new catastrophe bond issues in the pipeline and scheduled to complete during Q2 2017. It will take some significant upsizing of the pipeline deals or a number of further cat bonds to come to market if outright growth is to be achieved by the end of the half-year.

Artemis tracks the developing catastrophe bond and insurance-linked securities (ILS) market, with every transaction recorded in our Deal Directory, a Market Dashboard available for users to analyse the sector and our charts, data & analytics enabling users to look at issuance and the market’s history more deeply.

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