First-Half Insurance-Linked Securities Issuance Sets Half-Year Record

The insurance-linked securities (ILS) market saw $8.5 billion in new issuance during the first half of 2021, a half-year record, according to a new report from Swiss Re.

The report, "Insurance-Linked Securities Market Insights," noted that many new ILS issues during the year's first half were oversubscribed and were upsized.

"After a robust performance through 2020, which demonstrated once again low correlation to other asset classes, conditions were ripe for new inflows of capital to the ILS market," the report said.

Swiss Re also reported that outstanding volume in the ILS market also grew during the first half of 2021, by nearly $2 billion to $33.6 billion from $31.7 billion at the end of 2020.

"With high issuance levels surpassing the level of maturities, the overall market continues to grow, and the market is on track for its third consecutive year of growth," the report said. At the ILS market's current rate of growth, a $50 billion market is possible by the end of 2025, Swiss Re said.

While the ILS market has seen pandemic-exposed bonds almost since its start, that segment of the market hasn't grown to the extent of the natural catastrophe bond segment, Swiss Re said. "Swiss Re recently returned with a new Vita issuance, and we're optimistic that offering pandemic risks will be an area of growth for the ILS market in the next few years," the report said.

The ILS market saw new sponsors throughout the first half, Swiss Re said, and more new entrants are likely to be attracted to the market during the year's second half by competitive pricing conditions.

The ILS market's strong first half puts it on pace to top $10 billion in new issuance this year and possibly top 2020's record issuance of $11.3 billion, the Swiss Re report said.