Swiss Re, a global reinsurance firm, recently released a report highlighting key insights from the insurance-linked securities (ILS) market in 2023, which emphasises a surge in new issuance and strong investment performance in the catastrophe bond market, despite the absence of major catastrophic events.
Swiss Re notes a significant growth in the ILS market, stating it “grew by more than 20% year-on-year to $43.1 billion, up from $35.5 billion in 2022.”
This growth was fueled by a substantial number of maturing bonds and new capital allocations.
Despite notable events in 2023 such as the Kahramanmaras earthquakes in Turkey and Syria and Hurricane Otis in Mexico’s Acapulco region, the overall impact on the ILS market remained minimal due to the absence of large-scale catastrophes.
Additionally, Swiss Re highlights, “New issuance increased by 63%, reaching a record volume of $15.4 billion, $2.6 billion more than observed in 2021, when the previous record was set.”
This surge was driven by 13 new catastrophe bond sponsors, indicating growing interest in alternative capital sources alongside traditional re/insurance partnerships.
A significant development noted by Swiss Re Capital Markets (SRCM) was the emergence of the cyber peril space within the ILS market. This expansion not only diversified the asset class but also provided cyber insurers with additional avenues to meet their capital requirements.
Investors in catastrophe bonds experienced a turnaround in returns compared to the challenges faced in 2022.
Despite uncertainties surrounding events like Hurricane Ian, the market recovered with minimal principal losses, recording a calendar year return of 19.69% for YE 2023, marking the highest one-year return since 2002.
Overall, Swiss Re’s publication underscores that 2023 was a year of significant growth and resilience for the ILS market, showcasing its ability to adapt and thrive despite challenges.
Our ILS focused sister publication, Artemis, recorded more than $16.4 billion of fresh cat bond issuance in 2023, beating the previous record set in 2021.
