Q2 ILS issuance falls on Bermuda but sector bullish overall

The volume of ILS deals issued in the second quarter of 2018 declined by 26 percent compared with the same period a year earlier driven by a smaller average deal size and a strong first quarter to the year, according to the latest Bermuda Insurance-Linked Securities (ILS) Market Report.

There were 26 new bonds issued in the quarter totalling $5.1 billion compared with 28 deals and $7 billion in the second quarter of 2017.

The average deal size for the quarter was lower relative to the same quarter last year. The average deal size during the quarter was $198.1 million, down from $249.4 million in Q2-2017.

The largest deal during the quarter was issued by Long Point Re III (Series 2018-1) to provide coverage for US tropical cyclone, earthquake, severe thunderstorm, winter storm (Northeastern US states only) in the amount of $500 million. At the lower end, there was a privately placed deal in the amount of $9 million.

In the second quarter, 19 deals matured with a notional value of $3 billion. The $2.2 billion of net issuance increased the total stock of outstanding capacity to $35.5 billion which is a 20.2 percent increase year-on-year.

The report noted, however, that for the first half of the year as a whole, new issuances totalled $9.5 billion which is in line with first half levels last year.

The report stressed that issuance in the second quarter follows an exceptionally strong showing in the first quarter of the year. Total issuance of $9.5 billion for the first two quarters of 2018 is the second highest issuance level for the first half of any year on record.

It also highlighted that Bermuda remains the leading jurisdiction for the issuance of catastrophe (cat) bonds. Insurance Linked Securities (ILS) issued from Bermuda represented 73.2 percent ($26.0 of $35.5 billion) of total outstanding capacity at the end of Q2-2018.