Catastrophe bond and related insurance-linked securities (ILS) issuance was particularly quiet in the third-quarter of 2022, but combined with a solid first-half of the year for the market, helped issuance for the nine-month period come in above-average at more than $8.9 billion, reports Artemis.
It examines a slow period for the marketplace on the back of a very active first and second quarter, as well as details of the first mortgage ILS transactions to come to market since April.
Excluding mortgage notes, $266.5 million of new risk capital was issued in the third-quarter of 2022 from seven transactions. The majority of this, $191.5 million, came from privately placed, or cat bond lite deals, accounting for approximately 72% of total issuance.
Just one traditional 144a catastrophe bond was issued in Q3, the $75 million Finca Re Ltd. (Series 2022-1) transaction from debut sponsor Canopius Group, providing the firm’s underwriting entities with multi-year protection against losses from US named storms and earthquakes (including Puerto Rico and the US Virgin Islands).
Highlighting just how subdued Q3 2022 issuance was, the comparable prior year quarter saw issuance reach almost $1.4 billion, while the ten-year average for the quarter is roughly $934 million.
Despite the dip in quarterly issuance, the figure for 9M 2022 is very strong at over $8.9 billion, making it the fourth highest level of issuance seen for the period in the past decade, and above the ten-year 9M average of $7.6 billion.
As of the end of September 2022, 58 catastrophe bond transactions have to come market, and although this is down slightly on the 60 seen last year, it is robust and shows that sponsor and investor appetite has remained.
The below-average volume of new risk capital issuance in Q3 2022 has resulted in a roughly $400 million decline in the size of the outstanding market when compared with the end of Q2, to $37.8 billion. However, the Artemis Deal Directory shows that this is still a significant $4.7 billion larger than at the end of Q3 2021, and approximately $1.9 billion above the outstanding market size at the end of 2021.