ILS market weathered pandemic year 'largely unscathed' with record $11.3bn issuance: Swiss Re

Global reinsurer Swiss Re has said that the insurance linked securities (ILS) market weathered pandemic year "largely unscathed" with new issuance reaching a record high of $11.3 billion by the end of last year.

According to Swiss Re’s ILS Market Insights report, new ILS issuance saw an increase of 106 percent from 2019.

Over $11.3 billion of ILS was issued in 2020 across 49 transactions, reflecting more than double the number of ILS transactions in the previous year.

Swiss Re noted that despite the COVID-related volatility ILS market witnessed a rebalancing of spreads by mid-year 2020.

“New and existing ILS sponsors, as well as investors, continued to show confidence in ILS as a dependable capacity source that provides attractive investment returns,” the report explained.

US wind bonds remained the dominant peril in the ILS market in 2020, although only 47 percent of the $6.4 billion in single peril bonds issued in the year covered US wind. The remainder covered a much broader range of perils than the single peril bonds issued in 2019, with US earthquake bonds increasing to 32 percent of issuance, up from 24 percent in 2019. An increased number of diversifying perils were also represented, Swiss Re said.

The net cash flow into the cat bond market was just over $1.6 billion throughout 2020, an increase of nearly ten times the net cash flow into the market compared to 2019.

At the end of 2020, the ILS market saw outstanding catastrophe bonds growth by roughly 5 percent year-on-year. The outstanding notional of the cat bond market increased to $31.7 billion, while the total of all cat bond maturities increased 73 percent to $9 billion in 2020 compared to 2019.

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