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Q4 catastrophe bond issuance of ILS falls

The state of Florida suffered massive, widespread and enduring damage from Hurricane Ian, the large and destructive Category 4 Atlantic hurricane, the deadliest to strike the state since 1935

Catastrophe bond and issuance of insurance linked securities fell by more than $1.5 billion in Q4 2022 when compared to the same period in 2021, according to a new report from Artemis.

Issuance fell to $1.6 billion, which is also roughly $560 million below the ten-year average for the quarter.

But the report notes that for nine of the last ten years Q4 issuance has exceeded the $1.5 billion threshold, leaving only 2018 as the outlier.

The cat bond and related ILS market report said it was a combination of property catastrophe risk deals, privately placed transactions, and deals covering other, non-catastrophe exposures that brought the new risk capital to market in the final quarter of 2022.

And more than 88 per cent, or $1.37 billion, provided cedents with protection against a range of catastrophe risks across numerous geographies.

The 15 fourth quarter transactions, comprised of 18 tranches of notes, were issued from mainly repeat sponsors, with just two new entrants. Ten of them covered a range of catastrophe perils in numerous regions around the world, accounting for the bulk of quarterly issuance.

The report said: “Together with nine-month 2022 issuance of almost $9 billion, the solid, albeit subdued, level of issuance in Q4 has taken full-year 2022 issuance to approximately $10.5 billion, which is above the ten-year average by more than $700 million, as shown by the Artemis Deal Directory.”

Despite issuance volume falling year-on-year, the 15 transactions issued in the fourth quarter is slightly above the average for the quarter, although significantly lower than the 24 issued in Q4 2021. At the same time, at approximately $105 million, the average size of deals issued in the quarter is also down on last year, and well-below the ten-year average of $185 million.

Capital markets investors pushed for, and achieved, strong pricing on deals. As a result, the spread (coupon minus expected loss) is at its highest point since 2012, and the same is true for the average multiple (coupon divided by expected loss), which the report explores.

GeoVera Insurance’s Veraison Re issuance and PICC Property and Casualty Company’s Great Wall Re were the only debut transactions from cedents during the 2022 fourth quarter.

The report said: “The quarter also saw four privately placed, or cat bond lite transactions come to market via the well established Eclipse Re and Isosceles platforms, although these deals also provided protection against catastrophe risks.

“Fourth quarter 2022 issuance also included the third Fidus Re transaction from Build America Mutual Assurance Company since 2018, the notes of which are exposed to losses to its financial guarantee insurance business.”

Artemis is a freely accessible source of timely, relevant and authoritative news, analysis, insight and data on the insurance-linked securities, catastrophe bond, alternative reinsurance capital and related risk transfer markets.


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Published January 09, 2023 at 7:58 am (Updated January 09, 2023 at 7:52 am)

Q4 catastrophe bond issuance of ILS falls

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