Cumulative catastrophe bond issuance passes $100bn

by Artemis on May 16, 2018

The catastrophe bond and insurance-linked securities (ILS) market has reached a new milestone, as strong demand from investors and sponsors has taken 2018 issuance to near $7 billion already, lifting total cumulative issuance since the market began passed the $100 billion mark, according to Artemis’ data on the market.

The impressive pace of growth in cat bonds and related ILS over the last two years has driven significant expansion of the market, as the use of securization and capital market investor backing for reinsurance and retrocession lifted cumulative issuance to this new three-digit billion high.

In fact, cumulative issuance by Artemis’ reckoning only stood at $80 billion as recently as January 2017, meaning the market has witnessed the $20 billion in issuance to take it to the $100.09 billion it sits at today in a period of just over sixteen months.

Catastrophe bonds and ILS cumulative issuance by year

Catastrophe bonds and ILS cumulative issuance by year

The chart above, part of Artemis’ data service that allow you to analyse the catastrophe bond and ILS market in more detail, shows the impressive growth witnessed over the last fifteen years, as cat bonds became an increasingly established component of major reinsurance programs.

Perhaps the most impressive indicator of the robust and healthy ILS market right now can be found if we look back over the last year and a half of cat bond issuance to find the peak twelve months.

Artemis’ data shows that there is a twelve month stretch where more than $14 billion of new cat bonds were issued, the highest for any twelve months since we began tracking the cat bond and ILS market way back in 1996.

2018 has witnessed a robust start to the year, with now just slightly under $7 billion of cat bonds and related ILS completed already this year.

In just the last few days, $800 million of new risk came to market through catastrophe bonds from regular sponsor USAA (with the $300m Residential Reinsurance 2018 Ltd. (Series 2018-1)), first-time sponsor TransRe (with the $250m Bowline Re Ltd. (Series 2018-1)) and another regular in Florida Citizens (with the $250m Everglades Re II Ltd. (Series 2018-1)) all of which completed this week.

There is another $1 billion or more of new cat bond transactions also set to complete before the end of May and sources have said to expect some more before the end of the first-half of 2018 as well.

So right now the cat bond and related ILS market is already destined to achieve $8 billion+ of issuance for the first-half of 2018, a pace that could set the market on its way to a new annual record, if issuance is strong later in the year as well.

The outstanding market, according to Artemis’ data, now stands at a new record high of $34.3 billion and that figure will increase by the middle of the year.

The catastrophe bond and related insurance-linked securities (ILS) market is likely on track for further records and milestones in 2018.

With investor interest in reinsurance-linked assets seemingly at a high and still rising, the opportunity for tapping the capital markets as a source of retro or reinsurance has never looked better.

Stay tuned to catastrophe bond and insurance-linked securities (ILS) market developments with Artemis, by keeping up with our regular ILS and alternative reinsurance news, cat bond and ILS transaction details, market Dashboard, statistics and charts.

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