After First Half's Record Pace, Catastrophe Bond Issuance Slowed in Q3

On the heels of a record-breaking first 6 months of 2023, the year's third quarter was a quiet period for the catastrophe bond and insurance-linked securities (ILS) market, with just $549 million in new risk capital brought to market, according to Artemis.

The Artemis Q3 2023 Catastrophe Bond & ILS Market Report said that three property catastrophe bond deals accounted for 73 percent of the third quarter's new issuance.

Catastrophe bond issuance through the first 9 months of 2023 stood at approximately $10.9 billion, Artemis said, more than $400 million greater than the full-year total for 2022.

Among the exposures addressed in third-quarter catastrophe bond issues were US named storm, California wildfire, international multi-peril, mortgage insurance risks, unknown property catastrophe risks, and cyber risks, according to Artemis.

The $549 million in third-quarter issuance was more than double the amount issued during the same period in 2022 but is still about $268 million below the 10-year third-quarter average, Artemis said.

"Q3 is typically the least active quarter of the year, both in terms of the number of deals and overall volume, and it's rare that Q3 issuance exceeds $1 billion, having only happened three times since 2014," the Artemis report said.

The third quarter total of six cat bond issues was slightly below the 10-year average of 7.3 new issues for the period, Artemis said. The six issues had an average size of $91.5 million, also below the 10-year average of $110 million for the third quarter, according to Artemis.

With a quarter remaining in the year, 2023 is already the fifth most active year ever in terms of new risk capital issued, and it's the sixth time in the past 7 years that annual issuance has topped $10 billion, Artemis said.

"Over the past decade, Q4 cat bond and ILS issuance has averaged $2.2 billion, and if Q4 2023 turns out to be just an average final quarter, 2023 would be the second busiest year in the market's history," the Artemis report said. "However, the expectation is that Q4 2023 will be busy ahead of the January renewals, so there's every chance that issuance levels hit a new record high this year."