Catastrophe bond issuance accelerates to record-setting pace in 2023

The pace of catastrophe bond issuance has continued to accelerate through recent weeks and according to Artemis’ data the cat bond market is now on a record-setting pace in 2023, with around $8.43 billion of cat bond and related ILS currently expected to have completed by the end of May.

Artemis has tracked the issuance of every single catastrophe bond and related insurance-linked securities (ILS) issuance within its extensive cat bond Deal Directory.

Including all Rule 144A property catastrophe bonds issued, all catastrophe bond structures covering other types of perils (life, health, specialty, operational risk etc), and the private cat bond deals we’ve reported on, the current total of new issues that have settled so far this year is $7.6 billion.

Click on the chart below to analyse cat bond issuance by year and type of transaction:

The just over $7.61 billion of new issuance recorded and settled so far in 2023 includes,just over $7 billion of Rule 144A property cat bonds, $417 million of cat bond structures exposed to life, specialty and other perils, as well as $117 million of private cat bond deals that we’ve tracked so far this year.

That figure is set to rise to just over $7.9 billion of cat bond and related issuance year-to-date by the end of this week, when newly settling deals are added.

That will already equal the January to end of May cat bond issuance record, according to Artemis’ Deal Directory data.

But, even more impressive is the fact that, by the end of the month, we estimate issuance will approach $8.43 billion, based on the pipeline of deals currently scheduled to close by the end of May 2023.

That will set a new cat bond issuance record for the first five months of the year, firmly putting the cat bond market on record-setting pace for what could be another new high by the end of 2023, if market conditions remain as positive as they have to-date.

The previous high, for cat bond issuance Artemis has recorded in the first five months of the year, was set in 2017 when issuance to the end of May reached just below $7.9 billion. Following that were 2018 at just over $7.8 billion and 2021 at $7.76 billion.

All of those prior year totals will be beaten by the end of this week, while by the end of May our estimate for over $8.4 billion of issued and settled catastrophe bond notes will break the record for the period by at least $500 million (as long as nothing else slips into June).

It’s testament to the strong execution seen in the catastrophe bond market, with sponsors flocking to it despite high reinsurance pricing, while investors and fund managers are responding with additional capital raised and the efficient recycling of capital from maturing deals.

With the cat bond market presenting an efficient alternative source of reinsurance and retrocession in 2023, it will be interesting to see how much activity there is through the traditionally quiet peak months of the hurricane season.

This year, it could be a time of opportunity for sponsors that can bring diversifying perils (so not US wind related) to the cat bond market, which would be well-received by investors and cat bonds funds, or for securing reinsurance and retro coverage early, in advance of the end of year renewals.

Track catastrophe bond issuance using the Artemis Deal Directory, Dashboard and Charts.