Report: cat bond momentum continued in the first quarter
The catastrophe bond market continued its upward momentum in the first quarter of the year, according to a state-of-the-market report prepared by Artex.
The spring 2024 edition of The Alternative View explores the latest insurance and reinsurance market conditions and the impact on alternative risk and alternative capital.
From a catastrophe bond perspective, the first quarter “unfolded with remarkable vigour”, it said.
It added: “For only the second time in the ILS market’s history, quarterly issuance for Q1 2024 exceeded $4 billion, and at $4.23 billion, issuance was 30 per cent higher than Q1 2023 and is above the 10-year average for the period by roughly $1.1 billion.”
It said non-life alternative capital rose by $11 billion, or 11 per cent, from $96 billion to $107 billion in 2023, supported by growth in catastrophe bonds, which contributed approximately $6 billion of the increase.
Kathleen Faries, chief executive officer of Bermudian-based Artex Capital Solutions, said: “Risk adjusted returns are significantly up over the last 24 months and that has driven some nimble capacity into the (insurance-linked securities) market, both in the form of collateralised reinsurance and cat bonds.”
In the US commercial insurance market, the report said, property pricing has moderated, while social inflation is here to stay in the casualty market, the report noting that the first quarter was the 26th consecutive quarter of P&C premium increases.
However, the report said, there was a softening trend within directors and officers and the cyber insurance market.
It said: “In both cases, the downward pressure on pricing results from high levels of competition in these markets and belies an uptick in claims frequency and severity.”
Addressing the global reinsurance market, the report said: “The most recent reinsurance renewals, on April 1, saw an increase in capacity available at the top end of programmes and a slight moderation in pricing and terms and conditions.”
The biannual report identified several trends, including:
• continued demand for alternative risk transfer solutions, including single-parent captives, cell captives and group captive programmes, driven by challenges experienced by many US and European property insurance buyers last year
• an increased interest in group captive solutions in the middle market for more difficult risks driven by some tightening of casualty terms and conditions
• an uptick in interest from European companies to establish onshore captives
• a robust appetite for cat bond issuances focused on the peak perils
• given the anticipation of a potentially active Atlantic hurricane season, hedging practices are gaining importance as a proactive measure to manage exposure to potential losses, and a lot of interest in industry loss warranties
• See the full report in Related Media
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