THE MIRROR OF MEDIA

Private cat bond issuance maintains momentum after strong start to 2021


To date this yr, 21 privately positioned disaster bond transactions have been issued with a mixed worth of greater than $672 million, which is sort of double the amount witnessed for everything of 2020, as proven by the Artemis Deal Directory.

A non-public placement, or cat bond lite transaction gives each buyers and sponsors with a extra streamlined, low-friction and more economical technique of accessing cat bond-backed reinsurance safety from the capital markets.

The primary personal deal we have now on report got here to market in 2011 and since then, annual issuance ranges have diverse however managed to remain above $350 million in every year since 2014, reaching a excessive of $997.2 million in 2017.

In actual fact, cat bond lite issuance remained above $900 million in 2017, 2018, and 2019, however dipped significantly in 2020 to only above $350 million.

Nevertheless, with the assistance of a very massive personal cat bond placement within the second-quarter of this yr, the $250 million Artex SAC Limited deal from an unknown sponsor, 2021 cat bond lite issuance has already reached $672.9 million, as at August 19th.

The chart beneath exhibits annual personal cat bond issuance over the previous 5 years.

private-cat-bond-lite-issuance-year

After the report stage of personal issuance seen in 2017 of virtually $1 billion, 2018 is the second most energetic yr for the market, when it comes to danger capital issued, at $947.8 million.

Cat bond lite issuance dipped in 2019 in comparison with the prior yr, however remained sturdy at greater than $903 million.

Issuance then fell significantly in 2020 and truly got here in beneath 2014, 2015, and 2016, earlier than rebounding strongly this yr.

The $672.9 million of cat bond lite issuance seen thus far in 2021 got here from 21 transactions, with a median deal measurement of roughly $32 million.

As proven by the chart, 2019 witnessed essentially the most offers, when 29 got here to market, adopted by 2017 and 2018, which each noticed 26 cat bond lite offers issued.

Regardless of annual issuance being decrease in 2020, this nonetheless got here from 22 particular person transactions.

With cat bond lite issuance already virtually double what it was final yr and better than in 2019 over the identical interval, 2021 seems on monitor to be one other bumper yr for this a part of the disaster bond sector.

Solely time will inform if annual issuance as soon as once more breaches the $900 million mark, and whether or not this may very well be the primary time available in the market’s historical past that non-public placements quantity to greater than $1 billion in a single yr.

Sponsors proceed to seek out the market’s personal cat bond platforms an environment friendly strategy to entry reinsurance and retrocessional capability from institutional buyers and ILS funds.

On the identical time, ILS funds proceed to utilise personal cat bond issuance as a strategy to securitize reinsurance offers to be used of their disaster bond fund methods.

You can break down the issuance we’ve recorded by type, including property cat bonds, private cat bond deals, other lines ILS and mortgage ILS, using our charts.

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