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Insurance-linked securities finish strong in 2016

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Insurance-linked securities activity increased in the 2016 fourth quarter, with $2.12 billion in new issuance for the largest quarter of the year and third-largest fourth quarter on record, Swiss Re Ltd. said Friday. 

“With 20 transactions, 2016 saw the fewest number of deals brought to market since 2009,” Swiss Re’s ILS Market Update said. “However, average deal size was the second-largest in history, behind only 2014, which included the $1.5 billion issuance of Everglades Re.”

The average size of a transaction in 2016 was $300 million, Swiss Re said, nearly 20% larger than the average deal size in 2015.

The second half of the year was a “surprisingly active” period for new ILS issuance, Swiss Re said, as investors were expecting light activity to continue on the heels of the disappointing totals from the second quarter.

However, the third quarter posted $925 million in new issuance, the first time the third quarter was larger the second quarter, which is typically the busiest quarter of the year due to the U.S. wind season, according to the report. The $3.04 billion of new issuance in the second half marks only the fourth time in history of second half issuance over $3 billion.

Swiss Re said that issuance in 2016 was once again dominated by U.S. wind and earthquake deals, with each of the two perils contributing to over half the market.

“These peak U.S. perils were complemented by many diversifying perils,” Swiss Re said, “including Canada earthquake, Europe windstorm, Japan typhoon and earthquake, Australia cyclone and earthquake, extreme morbidity and for the first time since 2005–motor third party liability.”

Swiss Re said the first half of 2017 “is already off to a good start with over $500 million having settled in early January.”