Not a sign of doom and gloom if 2024 isn’t a record year for cat bonds: Brad Adderley, Appleby
Speaking with Artemis, Brad Adderley, Partner at global law firm Appleby, emphasised that while 2024 may not be a record year for catastrophe bond issuance, it is not a sign of doom and gloom, as the market has already had a strong year despite a subdued third quarter.
Artemis spoke with Adderley ahead of the launch of our Q3 and 9M 2024 catastrophe bond and related insurance-linked securities (ILS) market report.
After a record-breaking 2023 for cat bond issuance and a strong first half of 2024, which has already surpassed the $13 billion mark—a feat only achieved twice before—the market remains in a solid position.
This strong performance holds despite a subdued third quarter, with issuance mainly driven by private deals and a new cyber cat bond, along with just one 144a property cat bond placed.
Although the outlook for the final quarter of 2024 is uncertain, Adderley explained that as of mid-September there were a lot fewer quotes for new deals going out than last year. As a result, he does not expect Q4 to set a record or 2024 to be a record year for issuance volume.
“On the cat bond side, it all seems very positive,” said Adderley. “I don’t think it’s going to be a record fourth- quarter or record year, but honestly, that’s ok. It’s not a sign of doom and gloom at all.”
Adderley expressed enthusiasm about how mainstream catastrophe bonds have become.
He commented, “But what I like is that this is more normal. Think back just five years ago, there was still a lot of talk around what’s a cat bond? How can this structure benefit me? But now, there’s consistently new players, bigger deals, returning players, and new risks, just think of all the cyber cat bonds in the market.
“I think that this is just changing normally. For years, it was all new and exciting, but now it’s just a normal thing for a cedent to do. And that’s because of time, because of growth, because of new investors.
“Ultimately, it’s more mainstream, it’s more normal now, and to me, that’s what is impressive. That is the bit I like,” he added.
Adderley also discussed the growing interest in sidecars, saying, “People talking about sidecars in September gives me the impression that they are actually going to happen. It’s not like a last minute, let’s see if I can do something thing, it’s actually more of we’re going to do this, which means there will be sidecars, which is another positive for the market.”
Despite his positive sentiments about catastrophe bonds, Adderley was less impressed with discussions of potential market softening.
“Is seven years of a soft market, seven years of pricing going down and terms going down, offset by one and a half years of, shall we call it better pricing? For my purposes, how can we, as a market, when we hear about investors not wanting to come in and investors needing to see that it’s a viable community and so on, after a year and a half, talk about softening?” he questioned.
“Remember, this market is not driven by losses. It’s driven by people being fed up, inflation and social inflation and everything else. So, how can we, knowing what we just went through, even consider the term softening. I am hoping the strong pricing levels will continue into 2025,” he concluded.
All of our catastrophe bond market charts and visualisations are up-to-date, so include this latest quarter of issuance data.
We will keep you updated on all catastrophe bond and related ILS transaction issuance as 2024 progresses, and we’ll report on the evolving trends in the cat bond, ILS and collateralised reinsurance market.
