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New issuances of insurance-linked securities totaled $7.31 billion in the first half of 2018, compared with $8.4 billion in the first half of 2017, according to a report Wednesday from Swiss Re Ltd.
First quarter saw $3.28 billion of 144A securities issued across six transactions covering extreme morbidity, earthquake and U.S. multiperil, according to the report Insurance-Linked Securities Market Update Volume XXIX, August 2018, from Swiss Re.
Second-quarter issuance reached $4.03 billion in 14 transactions covering mainly U.S. multiperil or state-specific wind coverage, the report said.
The $3.28 billion of first-quarter issuance was the largest on record, while second quarter’s $4.03 billion trails only last year’s record second-quarter issuance of $6.23 billion.
“That said, issuance for the first and second quarters are generally larger than the latter half of the year, with sponsors seeking coverage ahead of the U.S. hurricane and severe thunderstorm season,” the report noted.
The total of $10.5 billion for 2017 was also the first year during which issuance topped $10 billion annually, according to data in the report.
As of June 30, 2018, there was $29.11 billion of issuance outstanding compared with $26.9 billion as of June 30, 2017, the data showed.
Indemnity triggers accounted for the majority of value for first-half issuance at $4.6 billion, followed by parametric triggers at $1.36 billion and industry index triggers at $1.3 billion, the data showed.
Notable issuances included FloodSmart Re, the first-ever catastrophe bond from the Federal Emergency Management Agency for the National Flood Insurance Program, as well as Scor S.E.’s Atlas Capital UK 2018, the first deal to be domiciled in the U.K.
The report was bullish on the numbers in the wake of last year’s substantial industry losses.
“The first half of 2018 demonstrated once again that the insurance-linked securities market is effective in providing re/insurance protection, even in years following frequent and sizable catastrophic events,” the report said.
Estimates from Swiss Re Institute’s sigma put insured losses for global natural catastrophe events at $136.06 billion for 2017, up 186% from $47.56 billion in 2016, the report said.
The U.K. government is encouraging Brazil to use its insurance-linked securities regulatory and tax framework to issue ILS and catastrophe bonds, Artemis.bm reports. Brazilian insurers and reinsurers could use the U.K. ILS framework to transfer their own risks while the government could utilize it for sovereign risk transfer. The United Kingdom and Brazil plan to explore several insurance products including ILS to diversify complex risks in the Brazilian economy, the governments said.