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Xactanalysis Insights and PCS

Outstanding cat bond market favours aggregate cover for first time


Catastrophe bond issuance during 2016 was dominated by aggregate coverage, a trend that has continued into 2017, and for the first time in the market’s history more of the outstanding market features aggregate coverage than per-occurrence, according to the Artemis Deal Directory.

As of January 11th 2017, data from the Artemis Deal Directory shows, that of the outstanding catastrophe bonds with available coverage type (annual aggregate or per-occurrence) information which amounts to $23.06 billion, 51% or $11.7 billion utilises aggregate coverage.

This is the first time since the cat bond market’s inception in the late 90’s that the outstanding cat bond market has become more aggregate based, with the large majority of new deals brought to the catastrophe bond market in all years prior to 2016, being structured on a per-occurrence basis.

The Artemis Q4 and full-year 2014, and 2015 Catastrophe Bond & ILS Market Reports, show that issuance in both of these years was weighted towards per-occurrence coverage; with about 65% – 70% of new deals being structured this way.

Prior to 2016 the large majority of quarterly issuance was structured to provide per-occurrence coverage, but a shift in sponsor appetite for aggregate protection, which cat bond investors have supported, has resulted in a notable shift during 2016.

Catastrophe bonds & ILS outstanding by coverage type (annual aggregate or per-occurrence)

Catastrophe bonds & ILS outstanding by coverage type (annual aggregate or per-occurrence) - Source:

As evidenced in the Artemis Q4 and full-year 2016 Catastrophe Bond & ILS Market Report, roughly 70% of issuance witnessed in 2016 provided aggregate coverage, so a significant shift from the previous two years.

Furthermore, the per-occurrence coverage focus of cat bonds that have already matured in 2017, combined with $525 million of aggregate coverage from Galilei Re Ltd. (Series 2017-1), which is the only deal issued this year to disclose coverage type information, has seen the outstanding market tip in favour of aggregate coverage, 51% to 49%.

So thanks to quarterly issuance on this occasion being weighted more towards aggregate cover as well as the maturities, for the outstanding marketplace this is a first, roughly 20 years after the catastrophe bond market was first established.

Just over $6 billion of deals are scheduled to mature in the remainder of 2017, $5.64 billion of which we have coverage type information for.

Of the $5.64 billion, the Artemis Deal Directory reveals that it’s nearly an even split between aggregate and per-occurrence coverage, which suggests that another strong year of aggregate issuance could see this coverage type pull further away from per-occurrence deals, in 2017.

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