Record Surge in Catastrophe Bond Issuance in 2023 ILS Market

The Insurance-Linked Securities market saw a record surge in catastrophe bond issuance and robust growth in 2023, driven by a calm catastrophe year and new risk offerings.
By: | February 26, 2024
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The Insurance-Linked Securities (ILS) market concluded 2023 with a record surge in catastrophe bond issuance and robust investment performance, largely due to the absence of major catastrophic events, according to analysis by Swiss Re Capital Markets.

The ILS market expanded by over 20% year-on-year, reaching $43.1 billion in 2023, up from $35.5 billion in 2022. This growth was primarily driven by a significant volume of maturing bonds and newly allocated capital.

The year 2023 was relatively calm in terms of large catastrophic events, leading to expected losses being relatively benign for ILS deals. Notable events impacting the ILS market included the Kahramanmaras series of earthquakes in Turkey and Syria in February and Hurricane Otis in Mexico’s Acapulco region in October.

New issuance saw a remarkable increase of 63%, hitting a record volume of $15.4 billion, which was $2.6 billion more than 2021’s previous record. The market welcomed 13 unique new catastrophe bond sponsors, who found value in utilizing alternative capital in tandem with existing re/insurance relationships.

Swiss Re Capital Markets noted the emergence of new risk offerings, particularly in the cyber peril space, broadening the diversification of the asset class and providing a new platform for cyber underwriters to support their capital needs.

In stark contrast to a challenging 2022, investors experienced significant returns in 2023. The market had ended the previous year with high volatility and uncertainty around potential losses from Hurricane Ian. However, mark-to-market valuations recovered, and principal losses were limited to a few structures.

Consequently, the Swiss Re Global Cat Bond Total Return Index posted a calendar year return of 19.69% for 2023, marking the highest one-year return for the index since 2002.

The robust performance of the ILS market in 2023 underscores the resilience and adaptability of this sector. The record issuance of catastrophe bonds and the emergence of the cyber ILS market are indicative of the market’s evolution and its ability to navigate a changing risk landscape.

To read the full report, visit Swiss Re’s website. &

The R&I Editorial Team can be reached at [email protected].

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