Viewing disaster rates, multipliers & spreads – Artemis.bm

In recent months, if you are interested in insurance-linked securities (ILS) or trading in the ILS market, you would not have missed the most talked-about news about the spread seen in disaster states, or the tightening of insurance rates and trends. passes through ILS rates and returns.

The spread of cats began to increase in early April, with the breakdown of needs, and the risk aversion of sellers, driving the trend.

The effects of the spread may be felt for a while and the risk reinsurance rates have dried up significantly in the mid-year renewal, it seems unlikely that the spread or the online rates of catastrophe protection will return to where they were. last year, anytime soon.

Cat bond marketers and cat bond fund managers discussed the mismatch between supply and demand in the early second quarter of the year, which led to higher prices in most cases.

The disagreement was on two levels, firstly on appetite for risk and secondly on the amount available, ensuring that there is a need and demand for disaster protection and a large market for ILS.

High global volatility means investors are becoming more risk-averse and averse, so they want higher returns.

Although, at the same time, many of the participants in ILS investments were affected by consecutive years of losses, which led to risk in places and caused some to not use additional resources, which also led to changes in business.

In addition, the flexible market that saw the entry of a strong cat bond fund at the end of 2021 and the beginning of 2022, which was widely used by the time the market pipeline burst in the second quarter of this year, which made the availability of funds one of the financial institutions. the main causes of the spread of the virus.

This means, combined with strong insurance rates and higher returns, that also led to a boom in the cat market, as cat investors also want strong rates.

It is natural that the rates of reinsurance and repayment of loans have been fixed in a series of reforms now, the bond market of cats has not saved the excess that was seen a year ago. So the spread also caused the premium prices of cats to go up to insurance and retro, connecting them more during the renovation.

As we explained in a recent article, the disaster bond market seems to be improving since the middle of June, since a greater relationship between supply and demand was found, which led some people who recently supported cats.

This may have also reflected the timing of the high rates of reinsurance, coming soon after Florida’s renewal, which may have also contributed to the increase in cat premiums.

Now, with all the information available on the prices of cats up to the second quarter, we can compare this with the previous data to see the prices seen in 2022.

Our most widely read quarterly catastrophe bond market reports details of the prices for the second quarter, which can be compared year-on-year by looking back at the quarter of the previous year.

The view of the expected loss of interest in cats compared to the amount that can be given, gives a clear direction of the prices of the prices of cats for Q2 2022 against the previous year, as seen below.

You can see that investors want to get a high return on investment at a time when they are at risk.

It’s interesting to compare Q2’s year-over-year spread with how the same chart looked in the first quarter of the year.

Remember, the spread started to work in the second quarter, but the chart below shows that the spread was already widening year-over-year due to the expected decline in inflation, and the high demand for investors.

disaster-bond-expected-loss-amount-estimate-2022-2021

The same chart from the previous year’s report, so Q2 2021, also allows comparing prices from Q2 2020.

What is interesting here, is that the spread was widening between 2021, so that 2021 shows below 2020, meaning that investors were willing to pay a lower return at the same levels of risk. This probably makes the 2022 spread a surprise, as investors have already reversed what was seen last year.

disaster-bond-expected-loss-amount-estimate-2021-2020

The same is clearly seen in the Our range of charts and views on the financial catastrophe and the insurance-linked market (ILS).

First, our chart that tracks expected loss interest rates, coupons and spreads at issuance by year.

The average spread fell even further in 2021, dropping from 4.96% to 3.88%.

But, at this time of 2022 and with the supply of cats so far this year included in the record, while we keep all these charts up to date with each new story, the spread so far this year has reached 5.5%, as seen below, the highest since 2012.

disaster-building-expected-loss-coupon-spread

Click the chart above, or this link, for more information.

Next, our chart of the number of risky bonds in the supply of the market, which shows the situation in all this data, and shows that many cats multiplying cats are now back to levels not seen since 2013.

catastrophe-bond-multiples-on-market-issuance

This data has been collected by Artemi during the 25 years of the financial crisis and is supported by approximately $150 billion given since then, all of which are detailed Artemis Deal Directory.

You can find all of Artemis’s risk market reports here and analyze our data on charts and visualizations here.

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