The insurance-linked securities (ILS) segment continues to grow slowly, mainly keeping pace with market demand, according to a AM Best report.
AM Best estimates the property catastrophe bond market reached approximately $45 bn by mid-2024, marking a $3 bn increase.
The Best’s Market Segment Report, “ILS Capacity Grows, as CAT Bonds Issuance Breaks Record,” provides an analysis of the global reinsurance industry ahead of the Rendez-Vous de Septembre in Monte Carlo.
- ILS capacity is increasing modestly and is primarily aligned with market demand.
- The 144A property catastrophe bond market set a new record in Q2 2024 with nearly $8 bn in issuance, driven by demand from new sponsors and larger renewal deals.
- Parametric loss triggers are receiving increased attention in the aftermath of Hurricane Beryl.
- The CrowdStrike IT outage raises concerns about the reliability of cyber catastrophe bonds.
By the end of 2023, Guy Carpenter and AM Best estimated the ILS market capacity at roughly $100 bn.
Capacity increased by mid-2024 as funds from maturing deals were reinvested into new transactions, record-breaking earnings from 2023 were redeployed, and a small amount of new capital entered the space.
One year of strong returns likely won’t attract enough new capital to soften the market significantly
Emmanuel Modu, managing director of insurance-linked securities at AM Best
The report also highlights that the 144A property catastrophe bond market set a new record for single-quarter issuance in the second quarter of 2024, with nearly $8 bn in issuance. Total issuance volume for the first half of 2024 reached $11.9 bn. Growth came from both new sponsors and upsizing of renewal deals.
ILS – 144A Property Cat Bond Issuance by Quarter
Risk-adjusted rate changes in the ILS sector remained flat to slightly lower at mid-year renewals. Rate decreases were more noticeable in less risky reinsurance layers, while rates in lower layers, where capacity is limited, saw slight increases.
ILS – Loss Multiples of Cyber Cat Bonds
| Issuer | Balance, $ bn | Loss Multiple |
| Natural Cat Bonds Issued in 4Q23 | 20 Issuers | 4.84 |
| East Lane Re VII Ltd. (Series 2024-1) | Chubb | 0.15 |
| Matterhorn Re Ltd. (Series 2023-1) | Swiss Re | 0.05 |
| PoleStar Re Ltd. (Series 2024-1) | Beazley | 0.14 |
| Long Walk Reinsurance Ltd. (Series 2024-1) | Axis Capital | 0.075 |
This rate activity aligned with expectations due to the strong returns of 2023 and the absence of a major catastrophe since Hurricane Ian in 2022.
“Unless a major catastrophe occurs in 2024, cedents will have more leverage in the January 1, 2025 renewal season,” said Wai Tang, senior director of insurance-linked securities at AM Best. “However, capacity providers are focused on maintaining discipline, with the poor returns of recent years still fresh in their minds.”
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