Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

2013 cat bond and ILS issuance passes $5Bn, over $18Bn outstanding


There seems to be no slowing down of the momentum that the market for insurance-linked securities and catastrophe bonds has generated in recent months and issuance continues apace into July. Based on figures in our Deal Directory, including two cat bonds still marketing, 2013 ILS issuance has now passed $5 billion.

The actual figure of all transaction issued in 2013 so far, and included in our Deal Directory is $5.1 billion. This includes the two recently launched cat bonds, MetroCat Re 2013-1 and Northshore Re 2013-1, which have yet to complete and could both increase in size. To hit $5 billion by this stage of the year is extremely impressive and shows the momentum that the market has built up in 2013.

Typically, Q3 cat bond issuance picks up as we move out of the peak of the U.S. hurricane season, but this year we have already recorded over $1 billion worth of new cat bond risk capital that has come to market in the third-quarter. Even with typical issuance over the rest of this year it seems almost certain that the market will surpass the magic $7 billion mark by year-end and another strong year of outright growth in catastrophe bond and ILS risk capital outstanding is already guaranteed.

According to reinsurer Swiss Re, which published some data on the ILS and cat bond market in 2013 today (we’ll write more about this on Monday), the amount of risk capital outstanding at the end of June was $17.1 billion. Aon Benfield Securities put this figure at $17.5 billion, based on including slightly different transactions.

$17 billion of risk capital outstanding was the record for the ILS and cat bond market set at the end of 2012. So the first half of the year has seen the market grow and now, just half way into July, you can add another $1 billion to those numbers taking risk capital outstanding in the ILS and catastrophe bond market to over $18 billion for the first time ever.

That is quite a milestone and we could see even more growth in the amount of risk capital outstanding as we move through the rest of 2013. If we see strong issuance through the rest of Q3 and Q4, even on a typical issuance pattern, we’d expect to see $2.5 billion at least more in new transactions. Even taking into account maturities we could see more outright growth, with $18.5 billion or even $19 billion now looking possible.

$18 billion of catastrophe bond and ILS risk capital outstanding is outright market growth of over $4 billion since the end of 2011, according to Swiss Re’s numbers. That, taking into account the billions of maturing cat bonds in that time as well, is clear evidence that this asset class and risk transfer tool continues to make good headway and is on the up.

Catastrophe bond and ILS risk capital outstanding

Catastrophe bond and ILS risk capital outstanding - Source: Swiss Re

You can read about every cat bond and ILS deal issued this year in our Deal Directory.

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