Cat bonds & related ILS reach new $17bn annual issuance record

Catastrophe bond and related insurance-linked securities (ILS) new issuance has now reached $17 billion in 2021, setting a new annual record for the total tracked by our Artemis Deal Directory.

It’s also notable that issuance of new Rule 144A property catastrophe bonds has surpassed $10 billion now for the second year running and only the second time in the cat bond market’s history.

In fact, property catastrophe bond issuance has already reached almost $10.4 billion in 2021, so is now closing in fast on the annual record set a year ago, of just over $11 billion.


ILS increasingly important to reinsurers: S&P

Reinsurers are increasingly turning to third-party capital to support their retrocession needs amid rising catastrophe losses, a new report has shown.

According to S&P Global Ratings, nearly 15 percent of total reinsurance capital is sourced through insurance-linked securities (ILS) issuances, while the share is increasing significantly within the retrocession market.

“In 2021, they ceded about 50 percent of their exposures at a 1-in-250 return period through collateralised instruments, such as insurance-linked securities (ILS),” said S&P’s credit analyst Maren Josefs.

ILS is expected to increase its market share over the next few years as innovative new issuances address new risks, such as cyber, climate change, and environmental, social and governance (ESG), predicts the agency.


SBAI to publish toolkit on implementing ESG in ILS strategies

The Standards Board for Alternative Investments (SBAI) has this morning announced the launch of its first toolkits targeted at asset managers and allocators to help them with the practical implementation of responsible investment across certain alternative investment strategies and asset classes.

The SBAI has been ramping up its focus on environmental, social and governance (ESG) alongside responsible investing and these guides are the latest step to try and bring some standardisation around adoption of these practices and to help allocators understand what’s required, from themselves, funds and managers.

The toolkits, which are the result of the work within the SBAI’s Responsible Investment Working group that is made up of some 150 professionals from over 140 asset managers representing over $1 trillion in AUM, are memos that first cover credit, equity long/short, macro, and systematic asset class strategies.


Reinsurers Increasingly Using ILS to Transfer Risks

Reinsurers are increasingly relying on third-party capital to support their retrocession needs, in which they transfer risks they have assumed to other counterparties.

According to a report from S&P Global Ratings, reinsurers have ceded about 50% of their exposures at a 1-in-250 return period through collateralized instruments, such as insurance-linked securities (ILS) in 2021. About 15% of total reinsurance capital is sourced through ILS issuances, while the share is “increasing significantly” within the retrocession market, the report says.

S&P said it expects ILS to increase its market share over the next few years as new issuances address new risks such as cyber, climate change, and environmental, social and governance (ESG).


Cat bond & related ILS issuance nears annual record, now over $16.1bn

Catastrophe bond and insurance-linked securities (ILS) new issuance continues apace in 2021, with the total issued and tracked by Artemis so far this year now above $16.1 billion, meaning that a new annual issuance record is expected to be reached imminently.

Issuance of new catastrophe bonds and the other related insurance-linked securities (ILS) that we track here at Artemis has now surpassed $16.1 billion, with the recent completion of the new US wildfire catastrophe bond for utility Sempra Energy.

Catastrophe bond market activity has been particularly strong through 2021 so far, as ILS investor appetite for cat bond funds expanded and sponsors increasingly turn to the capital markets for reinsurance and retrocession.

That has helped issuance of pure 144A property catastrophe bonds reach almost $10 billion year-to-date.


NZ Super Fund expands cat bond investments, doubles Elementum allocation

The New Zealand Superannuation Fund (NZ Super Fund), one of the government pension investment providers, has added to its insurance and reinsurance linked investments again in the last year, with a doubling of its allocation to investment manager Elementum Advisors, seemingly all in catastrophe bonds.

The New Zealand Superannuation Fund (NZ Super Fund) has been investing into a range of insurance and reinsurance linked assets for a number of years, with allocations to life settlements, an insurance run-off strategy, catastrophe bonds and collateralised reinsurance.

The cat bond and collateralised reinsurance investments are in two mandates with specialist insurance-linked securities (ILS) fund managers Elementum Advisors and Leadenhall Capital Partners.


Schroders finds 10% of institutional investors to increase ILS allocations

A new study of institutional investors from around the world by global asset management group Schroders has found that 10% of respondents plan to increase their allocations to insurance-linked securities (ILS) over the next year.

Schroders annual Institutional Investor Study features the perspectives of 750 institutional investors, including corporate and public pension funds, insurance companies, other official institutions, private banks, endowments and foundations, that are collectively responsible for a huge $26.8 trillion in assets.

As a result, is 10% said they will increase their allocations to a still relatively niche asset class like ILS, it is positive for the market as that is 75 major investors from around the world that believe the timing is right to increase investments into insurance and reinsurance linked investment markets.


Inaugural cat bond a clear vote of confidence in Hong Kong: Regulator

The inaugural catastrophe bond issuance in Hong Kong is a clear vote of confidence in the Special Administrative Region (SAR) and a sign of the exciting opportunities that lie ahead, according to regulator the Insurance Authority (IA).

The implementation of Hong Kong’s insurance-linked securities (ILS) regulatory regime and the legislation necessary to establish special purpose insurance or reinsurance vehicles for securitisations and issuance of catastrophe bond notes, is an initiative that has been portrayed as having close ties to mainland China.

This work culminated in the successful issuance of the first catastrophe bond in Hong Kong last month, with the $30 million Greater Bay Re Ltd. (Series 2021-1) cat bond sponsored by mainland and state supported reinsurance giant, China Re Group.


Allocations to alternative investments to increase, ESG a factor: Eaton Partners

A survey of institutional investors by Eaton Partners found that almost two-thirds intend to increase their allocations to alternative asset classes and private capital markets, with 9% of respondents targeting non-correlated assets specifically, while ESG is also seen as an important factor for future investment flows.

“As the world navigates new challenges related to the ongoing pandemic, inflationary pressures, supply chain disruption, and market volatility, LPs remain confident in the ability of private capital markets to weather these storms,” explained Jeff Eaton, Global Co-Head and Managing Director at Eaton Partners.

The survey found that institutional investors continue to have a constructive outlook on private capital markets and alternative investments, set against a backdrop of rising inflation, potentially higher interest rates, and with increased scrutiny on environmental, social, and governance (ESG) issues also a factor.