Insurance-linked securities (ILS) issuance reached a record-breaking $6.3 billion in Q2 2017, continuing the trend from the first quarter of the year, according to a report by Willis Towers Watson Securities, the investment banking business of Willis Towers Watson.

After a better than average issuance volume in the first quarter, the second quarter of 2017 saw $6.3 billion of property catastrophe bond capacity issued through 36 tranches, compared with $1.0 billion issued through 17 tranches in Q2 2016 and the previous quarterly record of $4.5 billion in Q2 2014, said the report titled “ILS Market Update, At a Crossroad – July 2017.”

Q2’s record issuance volume was driven by two of the largest ever catastrophe bond transactions, Kilimanjaro II Re 2017-1 and Ursa Re 2017-1, said the report, noting that, at the end of the second quarter, bonds provided $24.7 billion outstanding, up 16.5 percent year-on-year.

“This is against a backdrop of the soft market which sees some traditional reinsurers generating reduced equity returns, government yields in Europe and Japan remaining negative and material uncertainties such as Brexit and potential changes to the U.S. tax environment – all causing concern to insurers and investors alike,” said Willis Towers Watson Securities in a statement.

The combination of these factors is leading the ILS market to reach a positive tipping point as it manages a larger share of the world’s peak catastrophe risk, suggested the report. As a result, it continued, many opportunities remain for new issuance in non-peak cat and more generally across the property, casualty, life and health spectrum.

“The market has possibly never been in such robust health, with record breaking issuance and competition continuing to increase amongst ILS fund managers,” said Bill Dubinsky, head of ILS at Willis Towers Watson Securities.

“I believe this will create the conditions for significant innovation and development so that the benefits of the ILS product extend beyond peak property cat, where it may already be the preferred choice, and out across the wider insurance industry,” he added.

Source: Willis Towers Watson Securities