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Mortgage risk helps Q3 cat bond & related ILS to $1.42bn: Report


Issuance of catastrophe bonds and related insurance-linked securities (ILS) reached above average in the third-quarter of 2019, hitting $1.42 billion. But only thanks to issuance of mortgage insurance-linked notes, which accounted for almost three-quarters of deal volume.

q3-2019-cat-bond-ils-market-reportOur latest quarterly report on the catastrophe bond and related insurance-linked securities (ILS) market is available for you to download now.

The report, ‘Q3 2019 – Mortgage deals boost subdued market’, analyses a still above average third-quarter which saw $1.42 billion of new cat bond and related ILS issuance and looks at the composition of transactions issued during the three-month period.

Catastrophe bond and ILS issuance in the third-quarter of 2019 totalled $1.42 billion, and was comprised of 11 deals and 20 tranches of notes. Despite declining year-on-year, the volume of new risk capital brought to market in Q3 is the third highest of the last ten years for the quarter.

At $1.42 billion, catastrophe bond and ILS issuance is approximately $332 million above the ten-year average for the period, and, in Q3 2019, mortgage deals contributed significantly to this growth. Overall, mortgage deals account for almost 73% of Q3 2019 issuance, as shown by the Artemis Deal Directory. A range of private deals, known as cat bond lites, also came to market in the third-quarter.

For the first nine months of the year, catastrophe bond and related ILS issuance has declined by more than $4 billion in 2019, when compared with the same period in 2018. However, at approximately $7.8 billion, 2019 is still the third most active, in terms of deal value, first 9M period of the last decade, as shown by the Artemis Deal Directory.

Continuing and accelerating issuance trends witnessed in the second-quarter of 2019, mortgage insurance risks dominated third-quarter issuance. Deals from National Mortgage Insurance Corp. and Arch Capital accounted for almost three-quarters, or more than $1 billion of quarterly issuance.

So far in 2019, approximately $3.7 billion of mortgage insurance risk has come to market from eight deals, accounting for around 47% of all ILS issuance in the first nine months of the year. During the same period, 39 catastrophe focused deals have been issued amounting to approximately $3.8 billion, or 49% of total ILS issuance so far this year. The remainder of 2019 issuance includes a terrorism deal and a transaction covering medical benefit claims levels.

As well as the two large mortgage ILS deals, third-quarter 2019 issuance saw the return of smaller, private cat bond transactions. This includes a $25 million Florida named storm transaction from Florida Citizens, $260 million of unknown property catastrophe risks and $34 million of U.S. property catastrophe risks, all from unknown sponsors.

Another unknown sponsor also came to market in the third-quarter with $70 million of parametric Japanese earthquake risk in an Asagao transaction via issuer White Rock Insurance (SAC) Ltd.

At the end of the third-quarter of 2019, the size of the outstanding catastrophe bond and ILS market sits at just over $40 billion, which is roughly $700 million larger than at the end of the second-quarter. Year-on-year, the market has achieved outright growth of approximately 10%, expanding from the $36.57 billion recorded at the end of Q3 2018 to reach a new end of quarter high.

Approximately $2.3 billion of in-force catastrophe bond and ILS transactions are scheduled to mature before the end of the year. Over the last ten years, issuance in the fourth-quarter has averaged $2 billion, meaning that an above average level of issuance is required in the final three months of the year to ensure the market expands from the end of Q3.

Stay tuned to Artemis as we move through the last quarter of 2019 and we’ll keep you updated as the catastrophe bond market continues to evolve and expand.

Q2 2019 Catastrophe Bond Market ReportFor full details of third-quarter 2019 issuance, including a breakdown of cat bond issuance by factors such as perils, triggers, expected loss, and pricing, as well as analysis of the issuance trends by month and year. Download your free copy of Artemis’ Q3 2019 Cat Bond & ILS Market Report here.


For copies of all our catastrophe bond market reports, visit our archive page and download them all.

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