ILS issuance doubles in 2020, perils increasingly diversified: Swiss Re

Over $11.3 billion of insurance linked securities (ILS) were issued in 2020 making it a record year for new issuance, up over 106 percent on the levels seen in 2019, according to Swiss Re’s 34th ILS Market Insights report.

Issuance was boosted by more than double the number of ILS transactions in 2020 than there had been the previous year, with a total of 49.

US wind bonds remained the dominant peril in the ILS market in 2020, although only 47 percent of the $6.4 billion in single peril bonds issued in 2020 covered US wind. The remainder covered a much broader range of perils than the single peril bonds issued in 2019, with US earthquake bonds increasing to 32 percent of issuance, up from 24 percent in 2019. An increased number of diversifying perils were also represented, Swiss Re said.

The net cash flow into the cat bond market was just over $1.6 billion throughout 2020, an increase of nearly ten times the net cash flow into the market compared to 2019. By the end of 2020, the outstanding notional of the cat bond market increased to $31.7 billion, a 5 percent increase from 2019. The total of all cat bond maturities increased 73 percent to $9 billion in 2020 compared to 2019.

Swiss Re noted the ILS market had been largely unscathed by COVID-related market volatility in 2020, and by mid-year the market witnessed a rebalancing of spreads. “New and existing ILS sponsors, as well as investors, continued to show confidence in ILS as a dependable capacity source that provides attractive investment returns,” the report explained.