Cat bond prices rise in slower Q4, still $10.5bn issued in 2022: Report

The catastrophe bond market saw a lower than average $1.6 billion of issuance in the fourth-quarter of 2022, but the full-year total still reached $10.5 billion, while investors secured much higher pricing as cat bond spreads rose amid the hardening of reinsurance rates, Artemis’ latest quarterly report shows.

The Artemis Q4 and Full-Year 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.

Our new catastrophe bond and related insurance- linked securities (ILS) market report examines an interesting period for the industry.

Year-on-year, issuance fell, but an average number of deals came to market, while investors pushed for higher pricing amid the hardening reinsurance market landscape.

A combination of property catastrophe risk 144A cat bond deals, privately placed transactions, and deals covering other, non-catastrophe exposures brought $1.6 billion of new risk capital to market in the final quarter of 2022.

Of this, more than 88%, or $1.37 billion, provided cedents with protection against a range of catastrophe risks across numerous geographies.

All in all, 15 transactions were issued from mainly repeat sponsors, with GeoVera Insurance Holdings and PICC Property and Casualty Company being the only new sponsors to feature in the fourth quarter of 2022.

Together with 9M 2022 issuance of almost $9 billion, the solid albeit subdued level of issuance in Q4 has taken full-year 2022 issuance to approximately $10.5 billion, which is above the ten-year average by more than $700 million, as shown by the Artemis Deal Directory.

As a result, the outstanding catastrophe bond market reached a new end of year high, at $37.9 billion.

This isn’t the biggest the outstanding cat bond and related ILS market has ever been, but it is the largest size it has reached at December 31st, reflecting outright market growth of more than $2 billion over the course of 2022.

Throughout the past 12 months it’s been interesting to see the evolution of pricing within the catastrophe bond space.

On the back of consecutive loss years, amid financial market volatility and what’s expected to be an extremely late and prolonged Jan 1st reinsurance renewals season, capital markets investors pushed for and achieved very strong pricing on deals.

As a result, the spread above expected loss is at its highest point since 2012, and the same is true for the average multiple, which this report explores.

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

As the New Year begins, we will keep you updated on all catastrophe bond and related ILS transaction issuance as 2023 progresses, and we’ll report on the evolving trends in the cat bond, insurance-linked securities (ILS) and collateralised reinsurance market.

For full details of fourth-quarter and full-year 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.