The catastrophe bond market is poised to record its highest ever issuance levels in 2021, with nearly $8 billion of issuance having already been recorded, according to a Moody’s sector report on the insurance-linked securities (ILS) market.
Cat bond issuance thus far in 2021 has already outpaced the prior year, which itself saw record cat bond issuance, despite concerns around COVID-19.
Despite a brief pause in the issuance of mortgage insurance-linked notes (ILNs) from March to June 2020, Moody’s reported that cat bond issuance had increased to $11.4 billion in 2020, nearly double the issuance in 2019. That put 2020 in line with the issuance seen in 2017, making them two of the most active years on record.
Moody’s noted the cat bond market had proved itself resilient despite some losses and principal payouts, largely from prior period reserve development.
Cat bond issuance will continue to grow in 2021, Moody’s predicted, amid strong investor demand, as evidenced by the reduction in spreads and upsized deals in recent quarters. Growth in the ILS market will likely be driven by pure cat bonds from traditional and non traditional sponsors, it said, as well as insurance-linked notes from mortgage insurers.
Mortgage ILNs are on track to surpass the level reported in 2020, Moody’s noted, and now represent nearly 30 percent of all ILS outstanding.
Cat bond, Moody's