First Quarter CAT Bond, ILS Issue Volume on Pace To Set New Record

An arrow is bouncing from the tops of a 3D growing circular bar graph which is sitting on top of financial reports

March 10, 2020 |

An arrow is bouncing from the tops of a 3D growing circular bar graph which is sitting on top of financial reports

First-quarter catastrophe bond and insurance-linked securities (ILS) issuance is on a record pace, according to a report from Artemis.

The Artemis report said that data from its Artemis Deal Directory shows that the anticipated first-quarter volume of $5.1 billion in new catastrophe bonds and insurance-linked securities is 84 percent higher than the same period in 2019 and a 21 percent increase from the previous first-quarter record of more than $4.2 billion set in 2018.

The first quarter's new issue volume includes more than $3.9 billion in expected catastrophe-focused bonds, the Artemis report said. In comparison, pure catastrophe risk transferred through cat bonds in the first quarter of 2018 amounted to more than $3.6 billion.

The Artemis report noted that in recent years mortgage risk ILS deals have been growing in prominence. Over the course of 2019, $4.5 billion in mortgage-risk ILS came to market, the report said, while in the first quarter of 2020, almost $1 billion in mortgage risk is being transferred using ILS.

The first quarters of both 2018 and 2020 also saw the transfer of approximately $200 million in healthcare risk through ILS, the report said.

The report noted that the ILS investor base has become increasingly mature and appears likely to remain committed to continuing to participate in global catastrophe risk transfer.

According to the Artemis Deal Directory, risks transferred during the first 3 months of this year using catastrophe bonds and ILS include Florida named storms; other US perils including earthquake, severe weather, and fire; Mexico earthquakes and named storms; meteorite impact; volcanic eruption; and US flood.

Other covered perils include earthquake risk in Japan, Turkey, and Canada; extreme mortality in Canada, Australia, and the United Kingdom; mortgage insurance risks; and medical claim levels.

The Artemis report said that if pending transactions are upsized, first-quarter cat bond and ILS issuance could go even higher than $5.1 billion.

March 10, 2020