ILS records topple after $6.3bn quarter

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  • Big year: a surge in new catastrophe bond issuance in the second quarter means 2017, in the space of only six months, has outstripped the 2007 record for the total value of ILS issued in a single year

    Big year: a surge in new catastrophe bond issuance in the second quarter means 2017, in the space of only six months, has outstripped the 2007 record for the total value of ILS issued in a single year


A decade-old record for the value of catastrophe bonds issued in a single year has been broken.

The first six months of this year saw a greater value of cat bond issuance than during the full-year record set in 2007.

Major bond issuances, covering earthquakes and hurricanes in North America have been mostly responsible for the new record.

And it is good news for Bermuda, which has a market share approaching 75 per cent of the world’s outstanding insurance-linked securities capacity.

At the end of June, the value of catastrophe bonds issued to date this year was $8.55 billion. To put that in context, the record for a full year, set a decade ago, was $8.38 billion.

The inflow into the market more than made up for the $4.17 billion outflow from bonds matured during the second quarter.

There was more than a $1 billion market expansion due to new issuance during the three months. The total for the period was $6.37 billion, beating the previous second-quarter record set three years ago by $1.89 billion.

As of June 30, the global outstanding catastrophe bond limit was also a new record at $26.12 billion.

Aon Benfield, in its insurance-linked securities second-quarter update, stated: “The strong 2017 year is in part based on the renewal of the record amount of limit maturing in the first half of 2017.

“However, three new sponsors, favourable pricing, and the ability of alternative capital to provide significant capacity again and again, resulted in the expansion of the overall market.”

The new sponsors were Casablanca Re Ltd, Integrity Re Ltd, and Torrey Pines Re Ltd.

Casablanca and Integrity are issuances by Florida specialty companies, with both covering Florida named storms, and Integrity also covering severe thunderstorms.

Torrey Pines Re covers US earthquake risk, named storms and severe thunderstorms.

The second quarter also saw the placing of the third largest catastrophe bond, the $1.25 billion Kilimanjaro II Re series 2017-1 and 2017-2. Covering named storms and earthquakes in US, Canada and Puerto Rico, there was such demand from investors that the transaction was more than doubled from an initial $600 million.

Six public entities also issued $2.2 billion of catastrophe bonds during the second quarter. They were all repeat sponsors.

Pelican IV Re Ltd, issued by Louisiana Citizens Property Insurance Corporation, and Everglades Re II Ltd, issued by Florida Citizens, cover hurricanes losses in their respective states.

Ursa Re Ltd, the California Earthquake Authority’s seventh offering, and largest to date at $925 million, is the fifth largest cat bond issued.

MetroCat Re Ltd is the second cat bond by the New york Metropolitan Transportation Authority covering storm surge from New York hurricanes and earthquakes.

Texas Windstorm Insurance Association’s third Alamo Re Ltd covered named storms in Texas and severe thunderstorms, while Cranberry Re Ltd is Massachusetts Property Insurance Underwriting Association’s third cat bond covering named storms, severe thunderstorms and winter storms.

According to the Bermuda Monetary Report in June, ILS with a combined nominal value of $21 billion were listed on the Bermuda Stock Exchange at the end of the first quarter, or 77 per cent of global market capitalisation of ILS.

Bermuda’s dominance was reinforced in the first quarter, when almost 93 per cent of new issuance was underwritten by Bermudian SPIs, the BMA reported.

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Published Aug 8, 2017 at 8:00 am (Updated Aug 7, 2017 at 11:49 pm)

ILS records topple after $6.3bn quarter

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