Cat bond market slowed in Q3, but still grew $4.7bn in last year: Report

The global market for catastrophe bond issuance slowed down dramatically in the third-quarter of 2022, resulting in below-average issuance for the period. But still the outstanding cat bond market stands $4.7 billion bigger than at the same time a year earlier, Artemis’ latest quarterly report shows.

The Artemis Q3 2022 Catastrophe Bond and related insurance-linked securities (ILS) Market Report, available to download now, examines the cat bond and related ILS risk capital issued in the quarter.

While the third-quarter is typically the slowest of the year, Q3 2022 was particularly so with issuance of new catastrophe bonds coming in below-average for the period.

At just $266.5 million from seven catastrophe bond transactions, six of which were private, or cat bond lite deals, Q3 2022 issuance was especially low, and came in $666 million under the 10-year average for the quarter.

Year-on-year, Q3 issuance of catastrophe bonds was down by approximately $1.1 billion.

However, for the nine-month period it was a different story.

Combined with the strong level of issuance seen in H1, the subdued third-quarter still took 9M 2022 issuance to over $8.9 billion.

Artemis’ data reveals that over the past 10 years, the average level of 9M cat bond and ILS issuance has been roughly $7.6 billion, meaning that 9M 2022 issuance is still around $1.3 billion higher than the average, despite one of the quietest Q3’s on record.

The catastrophe bond market failed to grow in the third-quarter of 2022, because of the low level of new issuance.

In fact, as of the end of September 2022, the outstanding cat bond market size was $37.8 billion, meaning the market has shrunk by around $400 million from $38.2 billion at the end of Q2.

However, in spite of the dip from Q2 to Q3, the outstanding market size reached more than $1.9 billion higher than at the end of 2021, and year-on-year growth is even more impressive, with the cat bond market now $4.7 billion larger than it was at the end of Q3 2021.

The reasons the catastrophe bond market slowed more than normal in the third-quarter are largely due to the spread widening seen in the second-quarter that slowed issuance at the end of that period, which then dragged into Q3 and dented issuance.

It’s also worth considering the effect investor flows had in the second-quarter, as they came earlier in the period and by the end of the first-half most cat bond funds were fully-invested with little spare cash and we understand some planned issuances had been delayed until later in the year.

Now, we enter the fourth-quarter, a period that had been forecast to be very busy for catastrophe bond new issuance. But, now the ILS market has hurricane Ian’s fallout to contend with, so it will be interesting to see how that major catastrophe loss event affects cat bond issuance through the remainder of this year.

All of our catastrophe bond market charts and visualisations are up-to-date, so include this latest quarter of issuance data.

We’ll keep you updated on all catastrophe bond and related ILS transaction issuance as 2022 progresses, as well as evolving trends in the cat bond, insurance-linked securities (ILS) and collateralised reinsurance market.

For full details of third-quarter 2022 cat bond and related ILS issuance, including a breakdown of deal flow by factors such as perils, triggers, expected loss, and pricing, as well as analysis of the issuance trends seen by month and year.