How did the ILS market perform in the first half?

The insurance-linked securities (ILS) market displayed impressive strength and performance in the first half of 2023, experiencing a record-breaking influx of new issuances, according to a new report from Swiss Re. However, it is worth noting that capital appears to be more disciplined in this period.

According to Swiss Re’s latest ILS Market Insights Report, concerns arose regarding the capacity of the alternative capital sphere to meet demand after Hurricane Ian struck in the third quarter of 2022. This led to a dislocated ILS market at the beginning of the year. Nevertheless, investors worldwide recognized an opportunity and successfully raised funds.

During the first half of 2023, the new issue market shattered records in terms of absolute notional value and the number of deals, the report found. A staggering amount of nearly $9.85 billion was issued. This level of activity in the primary market has been unprecedented, even when compared to historical annual issuance. In fact, the amount issued in the first six months of this year has already surpassed the total issuance for the entire year of 2022. As a result, 2023 is on track to become the fourth highest year for new issuance, Swiss Re said.

The report also highlighted the cat bond market as an alternative and complementary option to the traditional (re)insurance market, particularly during its hardening phase. Notably, the primary market experienced significant activity from both repeat sponsors and new entrants. Six unique first-time sponsors joined the market in the first half of 2023, bringing a diverse range of risks, such as US wind and New Zealand earthquake, to the forefront, Swiss Re reported.

Additionally, the Swiss Re Global Cat Bond Total Return Index achieved remarkable success, mirroring the primary market’s performance. It generated an impressive return of 10.34% since the beginning of 2023, marking a record-breaking six-month period.

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