Insurance-linked securities issuance evaporates in third quarter

Insurance-linked security issuance continued to slump in the third quarter of 2019 with no new property/casualty instruments issued but outstanding property/casualty ILS capital declined just 1.8%  from the same period last year to $27.3 billion, according to a report Friday by Willis Re, the reinsurance brokerage unit of Willis Towers Watson PLC.

Property/casualty issuance in the first nine months of 2019 totaled $2.8 billion, compared with $8.7 billion in the same period in 2018. $1.1 billion in ILS instruments were issued in the first quarter of 2019 compared with $3.1 billion in the 2018 first quarter, $1.7 billion in the second quarter compared with $4 billion, and no issuance in the third compared with $1.6 billion.

More than half of the outstanding total, 54%, is tied to peak multiperil risk compared with 55% in the year ago period, data from the report showed. Another 12% was tied to U.S earthquake, which was even with last year, and 11% to U.S. wind compared with 12% in third quarter 2018.

Capital outstanding moved little as maturities in the third quarter were limited. “Since issuance is typically low in Q3, maturities are also low in Q3 and that was the case this year as well,” said William Dubinsky, managing director and CEO of Willis Securities Inc.

Catastrophe bonds and sidecars could get a boost going forward, Wiliis Re said.

“Starting in Q4, but with more effect in 2020, we expect growth in the more liquid forms of ILS, particularly catastrophe bonds, Mr. Dubinsky said in a statement issued with the report.

“Some investors are realigning their portfolios towards investments with lower projected losses. That could bode well for cat bonds. Sidecar interest has picked up as well, but the extent to which this interest will translate into completed deals will depend very much on the specific opportunities presented to investors.”