Swiss Re Insurance-Linked Fund Management

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Galileo Re takes 2013 catastrophe bond issuance to $6.54 billion


The completion yesterday of global specialty property casualty insurer and reinsurer Catlin’s latest catastrophe bond transaction, the $300m Galileo Re Ltd. (Series 2013-1), has taken 2013 catastrophe bond issuance to $6.54 billion, past the total seen in 2012 for the first time.

According to the Artemis Deal Directory catastrophe bond and insurance-linked security issuance in 2012 was $6.339 billion. With the settlement and listing of Galileo Re Ltd. yesterday, the total for catastrophe bond issuance in 2013 has now surpassed 2012.

This takes the size of the outstanding catastrophe bond market, based on core data from reinsurer Swiss Re and including every cat bond or ILS deal issued during 2013 that is featured in the Artemis Deal Directory, tantalisingly close to the magic $20 billion figure, at $19.787 billion.

Catlin’s Galileo Re cat bond saw strong demand from capital markets investors and ILS funds which helped it to grow in size by 71% while it was marketed. At the same time the pricing dropped to 7.4% above the return of U.S. treasuries which was below the originally marketed range, again demonstrating ILS investors readiness to take on risk for lower, but still attractive, returns.

The Galileo Re Ltd. catastrophe bond, which covers Catlin on an annual aggregate and industry loss basis for U.S. named storms, U.S. earthquakes, Canada earthquakes and European windstorm risks. It is Catlin’s fourth catastrophe bond issuance, after Bay Haven Ltd. in 2006, Newton Re Ltd. in 2007 and Newton Re Ltd. (Series 2008-1) in 2008.

The Galileo Re Ltd. variable rate note program and the $300m of notes issued have been admitted for listing at the Bermuda Stock Exchange. Appleby Securities (Bermuda) Ltd. acted as sponsor for the listing. The upsizing of Galileo Re to $300m and the subsequent listing of the cat bond notes on the BSX takes the total amount of insurance-linked listings on the exchange to a new high of $8.7 billion.

The chart below shows catastrophe bond and ILS issuance by month for 2013 to date, with October’s figure having jumped to $775m with the upsizing of Galileo Re, which gets the fourth-quarter off to a flying start.

2013 catastrophe bond and ILS issuance by month

2013 catastrophe bond and ILS issuance by month

The next chart shows catastrophe bond and ILS issuance by year. 2013 has now officially beaten 2012 for catastrophe bond issuance volume and the upsizing of Galileo Re has helped the market approach the $7 billion figure.

Catastrophe bond issuance by year 2003 to 2013

Catastrophe bond issuance by year 2003 to 2013

2013 catastrophe bond and ILS issuance still has a way to go before it beats the record volume issued in 2007. We are guaranteed to see the second highest annual issuance total on record and it looks almost certain that it will be over $7 billion, unless some major catastrophe or issue befell the market. $8 billion+ does look increasingly likely as well, especially when you consider the amount of maturities from regular cat bond sponsors which will occur by year-end.

According to market sources the catastrophe bond issuance pipeline looks strong for the remainder of the year, with a glut of new deals expected around year-end. How high the final total for 2013 can reach will come down to how many transactions can get completed this year, if many deals come to market together we could see some falling into 2014’s numbers as brokers try to stagger presenting them to investors.

You can read more about the Galileo Re Ltd. (Series 2013-1) catastrophe bond and every other cat bond transaction in our Deal Directory.

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