ILS issuance declines in Q2

Insurance-linked securities (ILS) issuance volume declined 26 percent year on year to $5.1 billion of new risk capital issued in the second quarter of 2018, according to the latest Bermuda Insurance-Linked Securities (ILS) Market Report.

This does, however, follow an exceptionally strong showing in the first quarter of the year, the report noted. In the first half of 2018 the issuance volume totalled $9.5 billion representing the second highest issuance level for the first half of any year on record. The total nominal amount of outstanding ILS increased 20.2 percent year on year to $35.5 billion.

ILS issued from Bermuda represented 73.2 percent of the total $35.5 billion outstanding capacity at the end of the second quarter.

The average deal size for second quarter of 2018 transactions was lower relative to the same quarter last year. The average deal size during the quarter was $198.1 million, down from $249.4 million in the same period a year ago. The largest deal during the quarter was issued by Long Point Re III (Series 2018-1) to provide coverage for US tropical cyclone, earthquake, severe thunderstorm, winter storm (Northeastern US states only) in the amount of $500.0 million. At the lower end, there was a privately placed deal in the amount of $9.0 million.

The majority of ILS covers North American perils which account for 63.3 percent of total outstanding volume. Asian and multi-regional perils account for 11.0 percent and 10.0 percent of the market, respectively, while the remaining four categories are each less than 5.0 percent and account for the remainder.

Primary insurers sponsored 50.1 percent of total coverage for North American perils. In contrast, the sponsor-type for 35.2 percent of the volume for Asian bonds falls under the other category which includes government agencies and pooled associations/cooperatives.

Multi-regional perils account for 10.0 percent of the market of which 56.8 percent is sponsored by reinsurers. Following the increase in privately placed deals, for which information is sometimes limited, the region of coverage is unknown for 3.0 percent of the market.

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