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Catastrophe bond issuance falls in first half

Posted On: Aug. 24, 2022 1:13 PM CST

Catastrophe bond issuance falls in first half

New issuance of property/casualty catastrophe bonds totaled $8 billion in the first half of 2022, down 8.9% from the same period last year, according to a report Wednesday from Swiss Re Ltd.

The report said that 2022 issuance was still the third-highest total recorded for first half new issuance, though, and a pullback in traditional reinsurance capacity may provide additional opportunity for the sector.

Second-quarter new issuance also featured $805 million in cat bonds from new sponsors, including Peak Reinsurance Co.’s Black Kite Re 2022-1 with $150 million cover for Japan Typhoon.

The hardening traditional reinsurance market may provide opportunities for the cat bond sector.

“Some reinsurers have reduced capacity in peak zones or closed their natural catastrophe portfolios entirely, which has led to increased opportunities in the ILS market,” the report said

Those opportunities should continue, the report said.

Like the traditional reinsurance market, inflation has hit the ILS market with increased costs for repair and rebuilding after losses. As models may not entirely reflect the effects of inflation on expected losses, “some issuing sponsors have chosen to provide investors with projected insured value data based on an upward trajectory of inflation,” the report said.