After a record-setting first-half to 2024, the disaster bond market is on monitor to interrupt one other main issuance file this yr, whereas the secondary market has already skilled file excessive buying and selling volumes, in keeping with international reinsurance agency Swiss Re.
The disaster bond market development pattern continued in 2024, with the ILS main market experiencing its most lively half yr on file, 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 Different 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 atmosphere stays unstable with key elections in France, the UK, and the US, and ongoing conflicts in Israel and Ukraine.
“In 2024, important pure catastrophes have occurred, corresponding to a number of harmful 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 elucidate that, “The ILS market stays unaffected because of the perils and geographies coated and the distant buildings current out there.”
Extra capital fuelled the busy interval of issuance from March via Might within the cat bond market this yr, assembly sturdy demand from quite a lot of sponsors.
This atmosphere led to excessive cat bond issuance ranges and in addition a few of the largest transactions seen to-date, with three billion-dollar plus main points within the interval.
Additionally vital to the disaster bond market attaining record-high ranges of issuance was a wholesome variety of new sponsors getting 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 regarded 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 lively interval, with new data set, Swiss Re explains.
“The secondary market skilled file excessive buying and selling volumes and unfold fluctuations, notably in business loss set off notes,” Jean-Louis Monnier mentioned.
In reality, the reinsurance firm notes that every month in Q2 2024 broke the earlier file set in March of 2020 for variety of trades.
By Swiss Re’s reckoning, April 2024 is now “probably the most lively 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 unimaginable quantity and testomony to a really wholesome and functioning market.
Primarily based on TRACE knowledge, Swiss Re sees Might and June as additionally having had greater than 250 secondary cat bond market trades every month.
It can’t be understated how essential that is, because the disaster bond market continues to develop.
The secondary market supplies priceless performance for ILS managers and traders, enabling them to higher handle their portfolios and allocate capital effectively. Buying and selling quantity development 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 powerful exhibiting for the cat bond marketplace for full-year 2024.
“Coming into the normal market lull, 2024 is on monitor to interrupt one other file by way of main issuances barring any disruptive disaster occasion till the first issuance exercise resumes after the wind season,” the corporate mentioned.
Monnier said that in the course of the first-half of 2024, “The Swiss Re cat bond indices mirrored the continuing attractiveness of the cat bond market, demonstrating sturdy returns and indicating sustained investor confidence.”
Concluding, “As we transfer ahead, the ILS market stays a lovely relative worth possibility, providing diversifying alternatives for traders and sponsors alike.”
The Artemis Deal Directory lists all disaster bond and associated transactions accomplished for the reason that 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 high of the record.
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