Property cat bond growth brings diversification in Q1: Report

On the heels of a record year for property catastrophe bond issuance, momentum continued in the first quarter of 2022 as sponsors brought approximately $3 billion of traditional 144a transactions to market.

The Artemis Q1 2022 Catastrophe Bond and related insurance-linked securities (ILS) Market Report, available to download now, examines the more than $3.5 billion of risk capital issued in the quarter.

Like last year, issuance was dominated by traditional 144a property catastrophe risk deals.

In total, 10 property cat bond deals featured in the quarter, amounting to just shy of $3 billion of issuance.

These types of deals account for 84% of Q1 2022 issuance and, year-on-year, the volume of property cat risk increased by 15% from $2.6 billion, but remains below the record set in 2020.

If you add the 13 privately placed ILS deals, the Q1 2022 total rises to roughly $3.2 billion, making it the third most active Q1 in the market’s history, in terms of property cat risk capital issued.

Across the 33 tranches of notes that comprise the range of property cat focused deals, (both 144a and private) trigger, peril, and regional diversification was strong.

While deals structured with an indemnity trigger dominated first-quarter issuance, accounting for 60%, the industry loss index trigger was also widely used in Q1 with nine tranches of notes leveraging this trigger structure, amounting to almost $1 billion.

Alongside the two most common triggers utilised in the period, one privately placed ILS deal added some parametric trigger diversification to quarterly issuance, which was complimented by a deal using a medical benefit ratio structure.

As the report shows, investors also welcomed peril and geographical diversification in the first-quarter of 2022.

In the U.S., named storms, flood risk, earthquake, severe weather, and wildfire risk featured in Q1, as issuance also provided protection against Canadian earthquake exposure.

Japanese earthquake exposure also featured in the period, as did Japan typhoon and flood risk.

While a range of private, or cat bond lite deals added some further unknown and U.S. property cat risk diversification.

Outside of the property cat arena, which, while small is starting to see more and more issuance, Pool Re sponsored a renewal of its UK terrorism risk bond, and Aetna issued its latest healthcare risk deal.

So, overall, it was a busy start to the year for the catastrophe bond and related ILS marketplace.

Artemis’ data shows that issuance is currently ahead of where it was last year, which ended up being a record year for the market.

Furthermore, the Artemis Deal Directory already shows several new issuances scheduled for April, and with Q2 typically the busiest time for the market it will be interesting to see where levels are come the half-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 first-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.