Trailing 12 month cat bond issuance passes $9B, 2014 on course for records

Catastrophe bond and insurance-linked securities (ILS) issuance has accelerated rapidly during the second quarter reaching $5.5 billion of new cat bonds issued to date in 2014, according to the volume of deals recorded in the Artemis Deal Directory.

At this level of issuance, around $5.5 billion of new risk capital issued through catastrophe bonds and ILS in 2014 to date, we already have a record for the first half of the year, beating the previous record for the first six months of $4.58 billion, which we recorded in the Artemis Deal Directory in 2007.

Second quarter 2014 catastrophe bond and ILS issuance has now reached $3.91 billion, which is also a record for a Q2, easily beating the $3.5752 bilion recorded in Q2 of 2007. With a number of deals yet to complete and the rest of May and all of June to go the second quarter issuance figure could, and probably will, rise even further.

Perhaps more impressive and the best sign that 2014 is on course to exceed records, if issuance continues to be brisk, is the fact that over the last 12 months, since June 2013, the Artemis Deal Directory has recorded just slightly over a stunning $9.21 billion of new cat bonds and ILS issued.

That trailing 12 month cat bond and ILS issuance figure is impressive enough until you see just how many deals have come to market in that time. Artemis has recorded 44 transactions over that 12 month period, easily the most in any 12 months since the market began.

We believe this is the highest volume 12 month period of issuance in the cat bond and ILS markets history. We can’t see another consecutive 12 months in our Deal Directory that gets close to $9.21 billion, this record level of new issues. Even if you take out any privately issued cat bonds that we’ve included the total remains a record.

So, a record first quarter of 2014 will now be followed by a record second quarter, with a record first half guaranteed, a record sized catastrophe bond in Everglades Re 2014 has been issued during Q2, we’ve now witnessed a record 12 consecutive months issuance and we look to be well on the way to a record annual issuance total, with every chance of beating 2007. Quite a year so far!

Of course the reason that total issuance has jumped so strongly in Q2 is largely due to a number of very large transactions coming to market, including the record $1.5 billion Everglades Re 2014-1, the largest single catastrophe bond ever issued.

The already a record second quarter issuance comes on top of a record $1.585 billion of new cat bonds and ILS issued during Q1. The launch of a number of new catastrophe bonds in the last two days, which we have reported on and added to our Deal Directory, all of which are set to complete during the month of May will take 2014 issuance to the $5.5 billion level at least.

We haven’t recorded a first catastrophe bond from the Texas Windstorm Insurance Association yet, despite their approval of a transaction last week. If some of the other cat bonds currently being marketed upsize and TWIA brings its first cat bond to market we could even get near to a $6 billion first half.

22 transactions have been recorded in the Artemis Deal Directory so far this year, making the first half of 2014 a very active period of issuance indeed. With the pricing environment remaining attractive and institutional investors maintaining their strong appetite for investments in catastrophe risk, at this time we see no reason for issuance to dry up through the rest of the year.

Whether 2014 will result in a record for the full-years issuance is impossible to forecast at this time, however if market conditions don’t change significantly it seems a real possibility now. $8 billion or more of issuance looks extremely likely, with seven months of the year left to run, how far above $8 billion the figure could get we won’t hazard a guess on until much later in the year.

Of course the 2014 Atlantic hurricane season has, as ever, the potential to change everything. How the market would react to a real hurricane threat or loss remains to be seen, or perhaps another benign season could help to keep rates low, we will have to wait and see.

For details of every catastrophe bond transaction issued since the beginnings of the market in the late 1990’s visit the Artemis Deal Directory.

Q1 2014 Catastrophe Bond & ILS Market Report – A Record Quarter

Don’t forget to download your copy of our Q1 2014 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 2014, looking at the new risk capital issued and the composition of the transactions completed during Q1 2014. Download your copy here.