Q4 2015 Cat Bond & ILS Report: Outright market growth continues

Our latest quarterly report on recent catastrophe bond and insurance-linked securities (ILS) issuance has now been published. The report, ‘Q4 2015 Catastrophe Bond & ILS Market Report – Outright market growth continues‘, analyses a quieter fourth-quarter, but one which helped extend outright market growth.

This report reviews the catastrophe bond and insurance or reinsurance-linked securities (ILS) market issuance at the end of Q4 2015, looking at new risk capital issued during the third-quarter and the composition of transactions completed. The report also features a brief review of full-year 2015 catastrophe bond and ILS issuance.

As catastrophe bonds and other ILS continue to cement their place as reinsurance and risk transfer structures, the market continues to adapt to meet both sponsor and investor demand.

Q4 2015 saw strong competition from the traditional reinsurance market, as reinsurers continued to compete on price and terms. But a number of regular cat bond sponsors, insurance, reinsurance companies and a corporation, helped to take the quarters total issuance to a healthy, although quieter than average, Q4 2015 total of $1.525 billion.

Despite being one of the quietest fourth-quarters of the last decade, catastrophe bond and ILS issuance remained strong, totalling $1.525 billion, according to the Artemis Deal Directory. Q4 is usually a fairly active period for cat bond and ILS transactions, and while no deals came to market during November, more than $1 billion of issuance during the final month of the year helped take full-year issuance for 2015 to $7.841 billion.

The $1.525 billion of risk capital issued during the quarter came from six transactions, which, excluding 2008 when no deals came to market during Q4, is the joint-lowest number of transactions witnessed during a Q4 over the last decade.

The catastrophe bonds issued in the quarter provided investors with a good deal of diversification, while providing their sponsors with insurance, reinsurance or retrocessional protection from capital market investors.

Issuance in Q4 2015 had a focus on U.S. perils, as is now typical for any quarter, but with a good deal of diversification also on offer. Q4 2015 cat bond issuance was also varied across trigger and for once provided investors with a higher return, as the majority of the quarters issuance paid a coupon of over 6%. For full details and a breakdown of key issuance statistics, download the report.

The fourth-quarter of 2015 alone failed to break any records, but strong investor appetite and the solid level of issuance witnessed throughout the year continued. As a result the size of the outstanding catastrophe bond and ILS market at the end of 2015 reached an impressive $25.904 billion, the highest level ever recorded in the Artemis Deal Directory.

As we now head into 2016 the cat bond and ILS investor community will be hopeful that a strong period of issuance is seen in the first-half of the year. Investor appetite remains high and sponsors are increasingly comfortable with placing a cat bond, or other ILS product, within their reinsurance programs.

Also in this quarters report we feature some market commentary from co-editor GC Securities, the investment banking, capital markets and ILS specialist arm of reinsurance broker Guy Carpenter. Download the report for this exclusive analysis of the industry loss warranty (ILW) market.

For full details of the quarter, including a breakdown of the issuance by factors such as perils, triggers, expected loss, pricing, and analysis of the issuance trends by month and year, download your copy of Artemis’ Q4 Cat Bond & ILS Market Report here.

For copies of reports from previous quarters, visit our archive page to download them all.

Don’t forget that you can view the breakdown of the outstanding catastrophe bond and ILS market, as well as other statistics on the market and its growth, using our ILS Market Dashboard and range of ILS market charts, statistics and graphs.