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Record Q4 drives annual ILS issuance to $16.4bn

19th January 2021 - Author: Katie Baker

In each quarter of 2020, although most notably in Q1 and Q4, catastrophe bond and ILS issuance remained above average.

q4-2020-catastrophe-bond-ils-report-coverCombined with the previous three quarters, the record-breaking level of both transactions and issuance in Q4 drove annual issuance to $16.4 billion, which, as shown by the Artemis Deal Directory, is another record.

The recently published Q4 2020 catastrophe bond and ILS market report from our sister site, Artemis, examines the highest ever annual issuance of $16.4 billion, driven in part by $6 billion of new risk capital brought to the market in the final quarter.

More than $11 billion of pure property catastrophe bond issuance, alongside another active year for mortgage insurance-linked securities (ILS) deals, helped the catastrophe bond and related ILS marketplace break records in 2020.

In the fourth-quarter, a substantial 24 transactions comprised of 53 tranches of notes came to market, taking 2020 issuance, in terms of the number of transactions, to a record of 80 issuances.

Steve Evans, Owner and Editor of Artemis.bm, commented: “2020 was a landmark year for the catastrophe bond market and for insurance-linked securities (ILS) funds and their investors.

“I’ve never seen such high-levels of issuance activity in the almost 25 years’ I’ve been tracking the development of ILS. This is testament to the resilience of the ILS market and its participants, as well as the utility of catastrophe bonds as a vehicle for transferring risk to the capital markets.

“ILS fund managers have demonstrated their ability to trade through challenging times and offer continuity to those seeking risk capital, even as their businesses transitioned to remote working.

“ILS investors have equally shown their ability to provide continuity of capital and demonstrated their desire for the relatively uncorrelated returns available from insurance related risks, which is very important for the future of this marketplace.”

As the sector heads into 2021, many of the forces which contributed to the record-breaking year for the catastrophe bond and ILS market remain, suggesting another active year for the marketplace.

“All the signs point to another busy year for catastrophe bonds and ILS as risk transfer structures, as sponsors increasingly look to the global capital markets as an efficient source of insurance protection,” said Evans.

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