Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

2014 catastrophe bond maturities by peril and expected loss


With over $4.2 billion of outstanding catastrophe bonds scheduled to mature in 2014, the insurance-linked securities (ILS) and cat bond primary issuance market will have opportunities to entice sponsors to re-issue their risks in new transactions in 2014.

2014 sees one of the highest totals for maturing cat bonds in the markets history. 2013 saw $3.8 billion or so of maturing cat bonds, which was easily outpaced by new issuance of $7.64 billion, so it is likely that 2014 issuance will easily beat the $4.2 billion or so of maturations, enabling the market to grow in outright size again by the end of this year.

With so many of the transactions maturing in 2014 originally issued during 2010 and 2011, a time when cat bond premium rates were significantly higher, the cost to the sponsor to renew or re-issue those transactions will be a lot less today.

The current ILS and cat bond pricing environment may work in the markets favour in 2014. It should enable sponsors whose cat bonds are maturing to bring that risk back to the capital markets at a much cheaper rate in 2014, with significant savings possible over their matured deals. This should help a significant number of the maturing deals be renewed or replaced  with fresh transactions from the same sponsors.

That’s not to say that their won’t be fierce competition for these layers of the sponsors reinsurance and retrocessional programs. The traditional reinsurance market will be well aware that there could be $4.2 billion of risk available for it to absorb and it will look to compete strongly on price and terms to try to encourage sponsors to look beyond the capital markets for renewing these layers.

The graphic below, taken from Munich Re’s latest cat bond market report, shows upcoming catastrophe bond maturities in 2014 by expected loss and by peril.

Upcoming 2014 catastrophe bond maturities by peril and expected loss

Upcoming 2014 catastrophe bond maturities by peril & expected loss - Source: Munich Re

Sponsors with maturing deals include The Hartford, Florida’s Citizens Property Insurance, the North Carolina JUA / IUA, the California Earthquake Authority and Tokio Marine. All of these sponsors have the potential to issue large new cat bonds if the pricing and market conditions are right.

If the cat bond market makes it through 2014 with further outright growth then it will have another near $3.5 billion of maturities rolling off risk in the first quarter of 2015. While maturities remain so high there is a good chance of further market growth, especially as new sponsors have been coming to market regularly in recent quarters.

Read our other article from Munich Re’s recent cat bond market report:

After busy 2013, ILS market sweet spot expected to broaden.

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