Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

$2.7B of catastrophe bond maturities shrink ILS market as 2015 begins


Having reached the largest size in its history at the end of 2014 at $25 billion, the catastrophe bond and ILS market has now shrunk by almost $2.7 billion, as vintage deals mature at the start of 2015, leaving the outstanding market at $22.337 billion today.

There has never been such a high volume of maturing catastrophe bonds and ILS within such a short space of time. This is largely due to two factors; firstly a very high level of primary issuance in December 2011 and January 2012 and secondly the fact that the majority of cat bonds and ILS continue to have a duration of three years, making January 2015 a peak month for maturing cat bonds.

We always knew that a lot of risk would be maturing in the first quarter and half of 2015, but the difference to the size of the market has been dramatic, shrinking it by $2.692 billion in just the last week. As a result the outstanding cat bond and ILS market is no longer at a record size and some of the investor capital returned through the maturing deals will need to be put back to work.

The pipeline however has not really got started yet in 2015, with just one deal having launched so far, the $200m health insurance-linked Vitality Re VI Ltd. (Series 2015-1).

That transaction alone is not going to soak up much of this maturing capital which means that ILS fund managers are either going to have capital on hand, something many firms cannot do as they have policies stating capital must be deployed, have to deploy capital into other collateralized reinsurance deals or have to return some capital to their investors.

Encouragingly, despite having contracted by almost $2.7 billion in just a week, the outstanding catastrophe bond and ILS market remains larger than it was at the end of 2013. However, with another $213m to mature in January, followed by another $715m scheduled to mature in February and $525m in March, it could take some time for the market to begin to grow positively once again.

Outstanding catastrophe bond & ILS market by year to 9th Jan 2015

Outstanding catastrophe bond & ILS market by year to 9th Jan 2015

Brokers continue to report a strong pipeline building for the first-half of 2015, so it is to be hoped that later this year the outstanding market will once again return to highs above $25 billion.

We’ve updated all of our charts and statistics on the outstanding catastrophe bond and ILS market to reflect the matured deals and the different composition of the market. Our Cat Bond & ILS Market Dashboard is also up to date to reflect the smaller market size.

We’ll keep you posted as new catastrophe bonds and ILS come to market throughout 2015.

Artemis’ Q4 2014 Catastrophe Bond & ILS Market Report – A busy finish to a record year for ILS

Q4 2014 Catastrophe Bond & ILS Market Report – A busy finish to a record year for ILSWe’ve now published our Q4 2014 catastrophe bond & ILS market report.

This report reviews the catastrophe bond and insurance-linked securities (ILS) market at the end of the fourth-quarter of 2014, looking at the new risk capital issued and the composition of the cat bond & ILS transactions completed during Q4 2014. It also includes a brief review of the full-year 2014’s record issuance.

Download your copy here.

Register today for ILS Asia 2023, our next insurance-linked securities (ILS) market conference. Held in Singapore, July 13th, 2023.

Artemis ILS Asia 2023 - Insurance-linked securities conference in Singapore

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