Cat bond lite issuance down YoY, but could still beat full-year average

Privately placed, or cat bond lite transactions continue to contribute to total catastrophe bond issuance, although so far in 2023, the total value of deals issued is below the 10-year average, according to Artemis’ Deal Directory.

As highlighted in the Artemis Q3 2023 cat bond and related insurance-linked securities (ILS) market report, after the first nine months of 2023, approximately $396 million of new risk capital from 13 privately placed cat bonds featured, accounting for around 4% of total issuance for the period.

Since the end of September, eight more cat bond lite transactions have been issued with a combined value of roughly $142 million, taking 2023 private cat bond issuance to approximately $542 million.

Analyse issuance by type of transaction (144A property catastrophe bonds, other cat bonds featuring life and specialty line risks, private cat bonds, and mortgage ILS) using this interactive chart:

The first privately placed cat bond transactions came to market in 2011, and since 2013, these types of deals have contributed at least $350 million to annual issuance levels.

The most active year for cat bond lite issuance was 2017, when more than $1.1 billion of risk capital was issued via these structures. Annual cat bond lite issuance also exceeded $1 billion in 2021, but fell to around $738 million in 2022. Currently, 2023 is the seventh most active year for cat bond lite issuance.

During the 10-year period 2013-2022, annual cat bond lite issuance has averaged $660 million, meaning that as things stand, 2023 is on track to be a below average year for these types of deals.

However, there is still some time before year-end and with both new and repeat sponsors taking advantage of market conditions, there’s every chance more private deals come to light before January 1st, 2024.

It would take another $120 million of private cat bond issuance for 2023 to be in line with the previous 10-year average, and more than $580 million of issuance, which seems unlikely, for 2023 to be a record year for the cat bond lite sub-sector.

You can analyse private cat bond issuance by year in our chart that breaks down all our tracked issuance by type here.

You can filter our Deal Directory to view only private cat bond deals.