2013 catastrophe bond issuance on course for a record, as Q2 hits $3.35 billion

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2013 catastrophe bond market issuance looks set to reach new highs as the second-quarter brings issuance to record levels for the first six months of the year and leaves the market well on its way to achieving $7 billion plus of issuance by the end of the year. Q2 saw $3.35 billion of issuance and the first-half of 2013 has seen just over $4.08 billion, as recorded in our Deal Directory.

There seems to be no stopping the cat bond market in 2013, as the effects of increased interest from investors, in catastrophe bonds and reinsurance-linked investments, combined with a new-found maturity in the market enabling greater flexibility for the cover sponsors seek, combine to lift issuance levels.

As ever, we have to caveat the total figures we display as every report that will be forthcoming after the end of the quarter will likely feature slightly different numbers. For the first-half of 2013 our Deal Directory contains one life & health ILS transaction which accounts for $150m in Q1 and a number of smaller, privately placed cat bonds. Some of the reports you’ll see in the coming weeks will not include life & health and most won’t include all of the private deals, hence total issuance volume discrepancies.

Discrepancies aside, 2013 is well on its way to seeing record levels of issuance as long as the current run-rate of new cat bond deals continues. There is already another $525m of new cat bonds which will settle in July, so starting Q3 off on a very healthy footing.

Every cat bond scheduled to complete in the first-half of 2013 has now settled meaning that the numbers for Q2 and first-half of 2013 issuance will not change.

Q1 of 2013 saw a slow start to the year, with $731m of issuance in our Deal Directory, but only $520m if you exclude the single life & health Vitality Re 2013 deal and the $61m Skyline Re which was privately placed.

Q2 more than made up for the slow start to the year and we believe the second-quarter of 2013 has seen the most issuance of any second-quarter since the catastrophe bond market began, at just over $3.35 billion. Again, this number is higher than others will quote as we include two privately marketed deals, but even excluding those Q2 issuance was high at just over $3.3 billion.

The first-half figure excluding the life & health and private cat bond deals is still a very healthy $3.82 billion, but we prefer the $4.08 billion as breaking through that $4Bn barrier is a real milestone for the market this year. The magic end-of-year $7 billion of issuance seems easily within reach, especially when you add-on the deals which will settle in July, which takes us to just over $4.6 billion of issuance.

Last year, 2012, saw a very healthy second-quarter and first-half to the year as well, but 2013 has beaten it. On our numbers, Q2 2013 saw 66% higher issuance with $3.53 billion compared to the $2.12 billion issued in Q2 2012. The first-half of the 2013 is 13% up on 2012, again by our numbers, as 2012 saw $3.61 billion but last year had a much better first-quarter of the year. Even excluding the private cat bonds and life & health deal, we still make 2013 up by 55% for the second-quarter.

For the outstanding catastrophe bond market, this means further growth in risk-capital outstanding, well into the $16 billion mark and with a chance of reaching $17 billion by year-end.

The second-quarter of 2013 has seen 15 transactions completed (according to our Deal Directory) bringing just over $3.35 billion of risk-capital into the market. For the first-half of the year we make that 19 transactions and $4.08 billion of risk-capital. The chart below shows just how impressive the second quarter has been when compared to the last few years catastrophe bond issuance by quarter.

Catastrophe bond issuance by quarter, to end of Q2 2013

Catastrophe bond issuance by quarter, to end of Q2 2013

At the moment, we see no reason for issuance to not hit $7 billion by the end of the year. The pipeline is said to still contain some more deals which will come to market during the hurricane season, some of which are said to be diversifiers which should be well received by investors. The fourth-quarter stands a chance of seeing strong issuance as well, especially as catastrophe bond rates remain low.

It will likely take a major catastrophe loss event or some other market changing economic upset to stop the cat bond market from hitting $7 billion this year. We look forward to covering the rest of the years deals and reporting on the markets progress as the year progresses.

We will of course cover all of the reports that emerge after the end of Q2 as well to give you all the different numbers that emerge for the size of the market and issuance levels.

Every catastrophe bond and ILS deal added to our Deal Directory in the first-half of 2013 can be found in the list below:

IssuerCedentRisks / Perils coveredSizeDate
Ibis Re II Ltd. (Series 2013-1)AssurantU.S. hurricane$185mJun 2013
Queen Street VIII Re Ltd.Munich ReU.S. hurricane, Australia cyclone$75mJun 2013
Tramline Re II Ltd. (Series 2013-1)Amlin AGU.S earthquake, Canada earthquake$75mJun 2013
Oak Leaf Re Ltd. (Series 2013-1)Unknown Florida based cedantFlorida hurricanes$30.49mJun 2013
Residential Reinsurance 2013 Ltd. (Series 2013-1)USAAU.S. hurricane, U.S. earthquake, U.S. severe thunderstorm, U.S. winter storm and California wildfire$300mMay 2013
Blue Danube II Ltd. (Series 2013-1)Allianz Argos 14 GmbHU.S., Caribbean, Central American, Mexican hurricane. U.S., Canadian earthquake$175mMay 2013
Sunshine Re Ltd. (Series 2013-1)Florida Municipal Insurance TrustFlorida hurricanes$20mMay 2013
Long Point Re III Ltd. (Series 2013-1)TravelersU.S. hurricane (Northeastern U.S. states only)$300mMay 2013
Armor Re Ltd. (Series 2013-1)American Coastal Insurance CompanyFlorida hurricanes$183mMay 2013
Pelican Re Ltd. (Series 2013-1)Louisiana CitizensLouisiana hurricane$140mMay 2013
Sanders Re Ltd. (Series 2013-1)AllstateU.S. hurricane, U.S. earthquake$350mMay 2013
Bosphorus 1 Re Ltd.Turkish Catastrophe Insurance PoolTurkey earthquake$400mApr 2013
Tar Heel Re Ltd. (Series 2013-1)North Carolina JUA / IUANorth Carolina hurricane$500mApr 2013
Caelus Re 2013 Ltd. (Series 2013-2)Nationwide Mutual Insurance Co.U.S. hurricane, U.S. earthquake$320mApr 2013
Merna Re IV Ltd. (Series 2013-1)State FarmU.S. earthquake (New Madrid region)$300mApr 2013
Everglades Re Ltd. (Series 2013-1)Citizens Property InsuranceFlorida hurricanes$250mMar 2013
Caelus Re 2013 Ltd. (Series 2013-1)Nationwide Mutual Insurance Co.U.S. hurricane, U.S. earthquake$270mMar 2013
Vitality Re IV Ltd. (Series 2013-1)Aetna Life Insurance CompanyMedical benefit claims levels$150mJan 2013
Skyline Re Ltd. (Series 2013-1)The Cincinnati Insurance CompanyNew Madrid earthquake and severe thunderstorms$61.2mJan 2013
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