The insurance linked-securities (ILS) market in Q2 2016 only saw $800 million in new issuances, the smallest since 2011, according to Swiss Re.
Swiss Re’s report, however, revealed that the ILS market was off to a promising start in Q1, with new issuances of $2.07 billion, up by 20 percent from the same period last year.
The pace of issuance did continue through until the second half of May and into early June, bringing the total for Q2 to $800 million. The issuance for the first half of the year ended in $2.87 billion, the sixth largest since 1997.
The report found that although issuance was down, the number of transactions was in line with recent years, reflecting a decrease in deal size.
It also showed that the average size of newly issued class was down over 35 percent from H1 2015 to approximately $130 million for 2016.
The first half of the year saw eight of 22 classes of bonds issued below $100 million compared to four classes of less then $100 million in all of 2015.
Of the 13 deals issued in H1 2016, two were new sponsors, First Coast and Laetere, the remaining were repeat sponsors.
In H1 2016, US wind and earth deals dominated the market, accounting for over 65 percent share.
The report suggested that these peak US perils were complemented by many diversifying perils including Canada earthquake, Europe windstorm, Japan typhoon and extreme morbidity.
According to the report, overall, the ILS market experienced a 7 percent decrease in the size of the market to $22.3 billion, as of 30 June 2016.
The report said: “It’s not unusual to experience a small dip in size ?at the midpoint (larger maturities in H1), as was the case last year as well. Only $1.59 billion of the $3.02 billion H1 issuance was issued on behalf of sponsors renewing their portion of the $4.35 billion expiring, as the sponsors that didn’t renew viewed bonds to be a more expensive option at the start of the year when they were planning their renewals.”
“We believe that the current market conditions, largely influenced by the lack of issuance in Q2 and the large maturities which weren’t renewed, will lead existing sponsors to replenish and top up their programmes, and will entice new sponsors?to enter the market.”
