Cat bonds set to smash issuance records in 2021: Moody’s

The catastrophe bond market will set a new record for issuance in 2021, according to a  Moody’s sector report on the insurance-linked securities (ILS) market, with nearly $8 billion of issuance having already been recorded in 2021.

That puts 2021 in a strong position to eclipse the issuance total seen in 2020, which was itself a record setting year. Moody’s reported that cat bond issuance increased to $11.4 billion in 2020, despite a brief pause in the issuance of mortgage insurance-linked notes (ILNs) from March to June 2020.

That means 2020 saw nearly double the issuance in 2019 and around the same level as seen in 2017, making them two of the most active years on record to date.

Moody’s noted the cat bond market had proved itself resilient despite some losses and principal payouts, largely from prior period reserve development.

Cat bond issuance will continue to grow in 2021, Moody’s predicted, amid strong investor demand, as evidenced by the reduction in spreads and upsized deals in recent quarters. Growth in the ILS market will likely be driven by pure cat bonds from traditional and non traditional sponsors, it said, as well as insurance-linked notes from mortgage insurers.

Mortgage ILNs are on track to surpass the level reported in 2020, Moody’s noted, and now represent nearly 30 percent of all ILS outstanding.

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