After a record-setting first-half to 2024, the disaster bond market is on monitor to interrupt one other main issuance report this yr, whereas the secondary market has already skilled report excessive buying and selling volumes, in line with international reinsurance agency Swiss Re.
The disaster bond market progress pattern continued in 2024, with the ILS main market experiencing its most energetic half yr on report, Swiss Re’s newest insurance-linked securities market report states.
The ILS staff at Swiss Re recorded US $12.3 billion of main cat bond issuances throughout 49 transactions that got here to market within the interval, which the staff notes was “pushed by sturdy investor demand and an extra of capital.”
Jean-Louis Monnier, Head ILS in Swiss Re’s Various Capital Companions division, commented on the interval below assessment, “The primary half of 2024 has been a interval of each problem and resilience for the worldwide financial system and the Insurance coverage-Linked Securities (ILS) market. Inflationary pressures from 2023 have begun to ease, and central banks worldwide have adopted a variety of financial insurance policies. The worldwide geopolitical setting stays unstable with key elections in France, the UK, and the US, and ongoing conflicts in Israel and Ukraine.
“In 2024, vital pure catastrophes have occurred, equivalent to a number of damaging extreme convective storms within the US and earthquakes in Japan and Taiwan.
“Regardless of these occasions, the cat bond market demonstrated low volatility, with minimal affect noticed to excellent bonds.”
Swiss Re’s report goes on to clarify that, “The ILS market stays unaffected as a result of perils and geographies lined and the distant constructions current available in the market.”
Extra capital fuelled the busy interval of issuance from March by way of Could within the cat bond market this yr, assembly robust demand from a wide range of sponsors.
This setting led to excessive cat bond issuance ranges and likewise a number of the largest transactions seen to-date, with three billion-dollar plus main points within the interval.
Additionally essential to the disaster bond market reaching record-high ranges of issuance was a wholesome variety of new sponsors coming into the marketplace for the primary time.
Swiss Re counted 9 first-time cat bond sponsors for the primary half of 2024, in comparison with 13 for the complete yr 2023.
Boosting issuance additional was repeat sponsors scaling up their disaster bond points, a driver of the three billion-dollar plus offers as corporations seemed to capitalise on investor demand and safe extra reinsurance safety from the capital markets.
The excellent cat bond market grew by 7.4% within the first-half, by Swiss Re’s numbers, with contemporary inflows of capital to ILS managers serving to, alongside maturities and coupon returns, giving ample new capital to assist the heavy issuance pipeline.
Because the cat bond market expands, secondary market buying and selling has saved tempo and 2024 noticed a very energetic interval, with new data set, Swiss Re explains.
“The secondary market skilled report excessive buying and selling volumes and unfold fluctuations, notably in trade loss set off notes,” Jean-Louis Monnier stated.
In actual fact, the reinsurance firm notes that every month in Q2 2024 broke the earlier report set in March of 2020 for variety of trades.
By Swiss Re’s reckoning, April 2024 is now “probably the most energetic cat bond secondary buying and selling month in historical past, based mostly on TRACE reporting knowledge,” the report explains.
Analysing that TRACE knowledge, Swiss Re believes there have been 272 secondary cat bond trades within the month of April alone, which is an unbelievable quantity and testomony to a really wholesome and functioning market.
Primarily based on TRACE knowledge, Swiss Re sees Could and June as additionally having had greater than 250 secondary cat bond market trades every month.
It can’t be understated how vital that is, because the disaster bond market continues to develop.
The secondary market gives helpful performance for ILS managers and traders, enabling them to higher handle their portfolios and allocate capital effectively. Buying and selling quantity progress is anticipated as main cat bond issuance accelerates and it’s encouraging to see the secondary market attain new heights this yr.
On the outlook, Swiss Re is anticipating a robust displaying for the cat bond marketplace for full-year 2024.
“Coming into the normal market lull, 2024 is on monitor to interrupt one other report by way of main issuances barring any disruptive disaster occasion till the first issuance exercise resumes after the wind season,” the corporate stated.
Monnier acknowledged that throughout the first-half of 2024, “The Swiss Re cat bond indices mirrored the continuing attractiveness of the cat bond market, demonstrating robust returns and indicating sustained investor confidence.”
Concluding, “As we transfer ahead, the ILS market stays a horny relative worth possibility, providing diversifying alternatives for traders and sponsors alike.”
The Artemis Deal Directory lists all disaster bond and associated transactions accomplished because the market was fashioned within the late 1990’s. The listing additionally lists the cat bonds ready to settle, that are highlighted in inexperienced on the prime of the listing.
Download our free quarterly catastrophe bond market reports.
We monitor catastrophe bond and related ILS issuance data, probably the most prolific sponsors in the market, most energetic structuring and bookrunning banks and brokers, which risk modellers feature in cat bonds most frequently, plus a lot more.
Find all of our charts and data here, or through the Artemis Dashboard which gives a useful one-page view of cat bond market metrics.
All of those charts and visualisations are up to date as quickly as a brand new cat bond issuance is accomplished, or as older issuances mature.
