Chicago:
There was a total of $ 11 billion of property cat bond limit placed, the highest on record in 2020 in comprasion with $ 5.4 billion placed in 2019. This represents a 104% increase year on year, exceeding annual maturities of $9 billion, according to a report by Aon..
In addition, quarterly issuance of $ 3.7 billion, was a record Q4 issuance quarter The total issuance for 2020 is made up 46 Property and Casualty transactions completed by 36 sponsors with an average deal size of $239 million, versus 23 transactions completed by 21 sponsors in 2019, with an average deal size of USD234 million, said the report..
The total amount of property cat bonds outstanding is marginally up (<2%) compared to 2019 at $29.5 billion.
“We believe that the busy pipeline will continue in Q1 and Q2 2021 given the expected maturities of approximately $2 billion, and $4.3 billion respectively. This quarter’s steady flow of new issuances of $ 3.7 billion, v $2.2 billion in Q4 2019, and total annual 2020 issuance, is a confirmation of the resilience of this market, with this positive momentum also anticipated to continue in 2021,'' said Aon.
A total of 14 transactions were issued and received healthy support from investors as 15 of the 22 classes upsized from their guidance, with 4 new issuers entering the P&C primary market in Q4.
Most transactions priced at their mid-to-tight ends of guidance, assisting new and repeat sponsors to come to market.Although repeat sponsors accounted for the majority of Q4 transactions, first time sponsors contributed to broader market growth.
Los Angeles Power and Water Department came to market with their first transaction.
“We still see a preference for cleanly structured deals from high-quality sponsors and investors still seem to favor per occurrence over aggregate triggers as a result of the most recent loss events.The volume of trading consistently increased over the course of the 4th quarter as there were approximately 63 trades in October, 84 trades in November and 107 in December.
As the primary issuance pipeline picked up after a very quiet 3rd quarter, so did trading. Secondary spreads continued to rebound moderately as they reflected the rates achieved in the primary market. Index based transactions made up approximately 75% of the new issuances and 45% of secondary trades in December while they only represented approximately one third of the outstanding cat bond market at the time.
“With approximately USD10 billion maturing in 2021, we expect to continue to see increased trading volume throughout the new year,'' said Aon..