The first half of 2018 aptly demonstrated that the insurance-linked securities (ILS) market has an undiminished appetite to provide re/insurance protection – despite last year’s expensive insured natural catastrophe losses, according to Swiss Re Institute’s sigma publication
While not quite reaching the issuance levels of H1 2017’s US$8.4 billion, new issuance during the first half of 2018 closely trailed at US$7.309 billion, said the report titled “Insurance-Linked Securities Market Update, August 2018.”
Q1 2018 saw the largest issuance for any first quarter on record at US$3.28 billion, while Q2 2018’s issuance of US$4.029 billion was second only to the second quarter of last year, the report said, explaining that issuance for the first and second quarters are generally larger than the latter half of the year, with sponsors seeking coverage ahead of the U.S. hurricane and severe thunderstorm season.
“As investors patiently awaited loss developments for the latter half of 2017’s catastrophic US hurricane and wildfire events, appetites were uninhibited by potential losses and investors continued to allocate capital to ILS at a relatively stable price during the first half of the year,” said sigma.
The report noted that the ILS sector’s appetite for re/insurance business remained “uninhibited,” despite natural catastrophes in 2017 of US$136.06 billion, an 186 percent increase from US$47.56 billion reported in 2016.
The sigma report explained that issuance for the first and second quarters are generally larger than the latter half of the year, with sponsors seeking coverage ahead of the U.S. hurricane and severe thunderstorm season.
The sigma report also revealed:
- During H1, the ILS market saw 20 new deals priced across 38 different tranches with an average deal size of roughly US$365 million, far surpassing the prior record set in 2014 of US$329 million.
- During Q1, US$3.28 billion of 144A notes were issued across six transactions covering extreme morbidity, earthquake and U.S. multi-peril.
- During historically strong Q2, US$4.029 billion notional was issued across 14 separate transactions, mostly covering U.S. multi-peril, or state-specific wind coverage.
- Along with seasoned sponsors, five new sponsors sought ILS coverage to help close the protection gap or complement traditional reinsurance in H1 2018.
Source: Swiss Re
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