Record $11.3B of new ILS issued in 2020: Swiss Re

A record $11.3 billion of new insurance-linked securities was issued in 2020 across 49 transactions, according to a report Monday from Swiss Reinsurance Co. Ltd.

The market also saw more issuers as the number of sponsors in 2020 jumped to 38 from 21 in 2109, including nine new sponsors, and a shift toward single peril bonds, Swiss Re said, adding the market did not see activity drop steeply due to the pandemic.

ILS markets “held up well throughout the turbulent months of March to May 2020” after a brief hiccup in March as some investors coped with liquidity issues, Swiss Re said.

New sponsors included Fidelis Insurance Holdings Ltd., which issued Herbie Re 2020-1 A, covering named storms and earthquakes as reported by Property Claims Services Inc.; Convex Group Ltd. with Hypatia 2020-1, covering any named storm event or North American earthquake event as reported by PCS; and Los Angeles Department of Water & Power, with its Power Protective Re Ltd. 2020-1, covering California wildfire risk.

Single peril bonds, those that cover just one exposure such as U.S. wind, accounted for 62% of issuance in 2020, up from 53% in 2019, as multiperil bonds saw share drop to 38% in 2020 from 47% in 2019, Swiss Re data showed.

According to a separate commentary from financial analyst Jeffries Group LLC, catastrophe bonds and sidecars outperformed collateralized reinsurers, earning the “favor” of investors. The decline in collateralized reinsurance capacity is expected to continue in 2021, which “should strongly underpin reinsurance and retrocession prices at the upcoming renewals,” Jeffries said.