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New issuance in the 2021 property/casualty catastrophe bond sector totaled $12.8 billion, topping the previous record in 2020 by 13%, Swiss Re Ltd. said in a report Thursday.
A host of new sponsors including the Government of Jamaica also helped drive the record issuance, and the market is expected to remain robust in 2022.
U.S. wind perils accounted for approximately 35% of the new issuance, followed by multiperil and U.S. earthquake catastrophe bonds. In 2021, new issuance outpaced scheduled maturities, leading to a net inflow of $1.8 billion.
Since the end of 2012, the catastrophe bond market has shown a compound annual growth rate of 9.4%.
Liquidity in secondary markets also helped bolster catastrophe bonds’ standing with investors, allowing them to actively trade in and out of positions. The highest volume of secondary trading occurred in May and June, with the last two months of the year also showing heightened activity, according to the Financial Industry Regulatory Authority, a nongovernmental organization that writes and enforces rules for brokers and broker-dealers.
In 2021, the Government of Jamaica became the first government in the Caribbean region, to independently sponsor a catastrophe bond. IBRD CAR 130 will provide up to $185 million of coverage for tropical cyclones based on a parametric trigger of atmospheric pressure.
“We have seen continuously increasing demand over the past decade, with the cat bond market growing at close to 10% per annum,” Judy Klugman, head ILS Sales at Swiss Re, said in a statement with the report, adding she expects “this positive momentum will continue in 2022” and beyond, as the sector provides true value both to sponsors and investors alike."
Annual issuances of new catastrophe bonds and other related insurance-linked securities increased by 15% to a record high of $14 billion in 2021, surpassing the previous record set in 2020, Artemis reported. According to Artemis’ report, new cat bond and related ILS issuances reached $3.2 billion in the fourth quarter of 2021, alone.