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Nearly $4 billion in insurance-linked securities to mature before July: Swiss Re


January 24, 2016   by Canadian Underwriter


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With nearly US$4 billion worth of insurance-linked securities maturing during the first six months of 2016, Swiss Re Capital Markets Corp. suggests it is “hopeful” there will be new sponsors entering the market this year.

In its ILS market update announced Friday, Swiss Re listed 24 issuances of catastrophe bonds, with a total value of $3.836 billion, that have already matured – or will mature – during the first six months of 2016. All figures are in United States dollars. [click image below to enlarge]

More than 70% of insurance-linked securities issued in 2015 were for U.S. wind and earthquake, Swiss Re Capital Markets said in its latest ILS update

“Though we do anticipate a healthy pipeline of new deals to come in (the first half of) 2016, it would be fair to wonder if there will be some contraction in the size of the overall market by the mid-point of this year (similar to what was experienced in 2015) as the trend of large maturities will continue,” Swiss Re stated. “We believe that market conditions remain favorable for issuance and are hopeful that sponsors will replenish their expired or expiring coverage and that new sponsors will emerge.”

Among the cat bonds maturing during the first half of 2016 were some covering Canadian risks. For example, $300 million in bonds issued by Lakeside Re III, covering Canadian and U.S. earthquake, matured Jan. 8.

Blue Danube II 2013-1 A – a $175 million issuance – matures May 23. It covers U.S. wind storm and earthquake, Mexican wind storm and Canadian earthquake.

Canadian wildfire is one risk covered by three issuances by Residential Re – totalling US$200 million – set to mature June 6. Residential Re also covers U.S. earthquake, winter storm and wind storm.

Issuance in the second half of 2015 “was dominated by US wind and earthquake deals, with the two perils accounting for over a 70% share,” Swiss Re stated. “These peak US perils were complemented by many diversifying perils including Canada, Japan, Turkey and Mexico earthquake, Australia wind and extreme mortality.”

2015 was the fourth-largest year on record for ILS issuance, Swiss Re reported, with $6.83 billion in securities being issued across 26 transactions and 34 tranches.

Those transactions were “strong enough to maintain the overall size of the market outstanding at a level near the record” of $24.1 billion set at the end of 2014, Swiss Re noted.

“Investors continued to express strong demand for bonds but were vocal about their desire for higher yields.” Swiss RE added. “New issuance in (the last six months of) 2015 saw a majority of the bonds issued with an expected loss (EL) greater than 2%, therefore offering spreads in the mid-single digits or above.”

Two of the biggest transactions, settled May 13, 2015 — one for $400 million and one for $300 million — were issued by Alamo Re for Texas wind storm.


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