Cat bond issuance in 2017 overtakes FY 2016, market hits $28bn record

Catastrophe bond issuance in 2017 has already reached $7.14 billion, according to Artemis’ data, which means that the year’s deal volume has already overtaken the full-year 2016 issuance, helping the outstanding market achieve a new record size at $28 billion.

2017 has seen the catastrophe bond market come alive, with now 33 new transactions consisting of 57 tranches issued and completed in 2017 so far, as well as another 6 new cat bond transactions still being marketed and slated to complete during the second-quarter.

The year began with a record first-quarter that resulted in $2.76 billion of catastrophe bond risk capital issued and the outstanding cat bond market hit a record size on at least two occasions prior to now.

Not only did that rapid pace of issuance continue, it has accelerated and we are now at $4.38 billion of issuance for the second-quarter of 2017 already, with at least another $1.12 billion to come from the 6 transactions still in the market.

Once all the Q2 cat bonds are completed, if none of them were upsized, we will see a second-quarter issuance record at $5.5 billion, which is $870 million ahead of the previous Q2 record set in 2014, which was the year when the record $1.5 billion Everglades Re was issued.

So 2017 catastrophe bond issuance of $7.14 billion by the middle of May is extremely impressive and signals the distinct possibility that another record year of issuance is on the way.

Catastrophe bonds issued and outstanding by year - (Click the chart for an interactive version)

By the middle of this year cat bond issuance will hit nearly $8.3 billion, which would already be the second highest figure for a full-year behind only 2014’s $9.1 billion.

So by the end of 2017 who knows? One thing’s for certain, the early forecasts of annual issuance in a range from $6 billion to $8 billion are set to be well and truly eclipsed in 2017.

The outstanding catastrophe bond market has reached a record size for the third time this year, according to Artemis’ data, with the market passing $28 billion in size for the very first time in its history.

These records are all despite the record level of maturities witnessed so far this year, which were widely expected to result in a contraction of the market at the start of this year.

In fact, with just $1.33 billion left to mature by the end of the second-quarter, the market would end the quarter at $27.81 billion, a record size for any quarter-end. So it would only take perhaps one more transaction to launch, or one of the 6 still in the market to upsize, for the outstanding catastrophe bond market to close out Q2 2017 at above $28 billion in size and likely hit yet another record.

Could we see the magic $10 billion of issuance by the end of full-year 2017? It seems eminently possible now, with first-half 2017 issuance set to be near $8.3 billion or greater.

That would be quite a marker for the catastrophe bond market, given the significant maturities experienced this year and the high levels of competition for risk from both traditional reinsurance companies and of course other forms of collateralized reinsurance.

The success of the cat bond market in 2017 underscores the appetite that capital market investors have for the returns of reinsurance risk, in liquid and securitized form. With that appetite remaining strong and continuing to grow, further cat bond records look almost guaranteed as 2017 progresses.

Note: Artemis’ data on catastrophe bond issuance includes every private transaction we can source information on, as well as full 144A broadly marketed issues. Hence our figures are typically higher than those quoted by broker reports, but we feel this provides a more holistic look at market activity.

Artemis tracks the developing catastrophe bond and insurance-linked securities (ILS) market, with every transaction recorded in our Deal Directory, a Market Dashboard and our charts, data & analytics enabling users to analyse cat bond issuance and the market’s history more closely.

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