Insurance-Linked Securities market update7467c134-2803-42f3... · underscored the cat-bond market’s merit by providing consistent liquidity while also demonstrating that committed

Insurance-Linked Securities market updateVolume XXX, February 2019

2 Swiss Re Insurance-Linked Securities market update – February 2019

Swiss Re Insurance-Linked Securities market update – February 2019 1

Table of contents

Introduction 03

New issuance 04

Primary market pricing 08

Maturities 10

2018 maturities 10

1H 2019 expected cat-bond maturities 12

ILS secondary markets 13

Relative value 13

Secondary trading 14

Cat-bond spread cycle 17

Swiss Re cat-bond indices 20

Sector data 22

Outstanding securities 24



Introduction The Insurance-Linked Securities (ILS) market built on a record-breaking 1H 2018 and closed the year strongly with new issuance, an active trading period, and new sponsors entering the market. The year also brought to light new challenges and insights. At the start of 2018, market participants spent much time adjusting after the impacts of the 2017 natural catastrophe events; and new capital was raised and put to work quickly through a busy first half of the year for new issuance. The year, however, ended with a turbulent 2H 2018, as negative loss developments from Hurricane Irma and a barrage of nat-cat events once again challenged the market norms of previously benign catastrophe years.

Investors remained steadfast in holding their positions through the first half of the year in anticipation of 2017 loss results from hurricanes Harvey, Irma, Maria, and the multitude of California wildfires. Market volatility spiked in 2H 2018 as another set of hurricanes (Florence and Michael) and more California wildfires exposed numerous cat bonds in the market to potential losses.

The end of 2018 saw some funds experience redemptions and capital trapped in collateralized reinsurance positions. This prompted investors to turn to the cat-bond market for liquidity, leveraging a willing secondary market, to sell positions and raise cash. The sell-off during 4Q 2018 provided other investors with opportunities to scoop up bonds at increasingly attractive prices. Moreover, the volatility during 2H 2018 underscored the cat-bond market’s merit by providing consistent liquidity while also demonstrating that committed investors still find value in this diversifying asset class.

Since 2012, cat-bond spreads have trended downward as investors established comfort in the market, but like any other market, spreads do not always move in one direction. In the cat-bond market’s early years, investors demanded premiums on illiquidity and modelling uncertainty, among other factors, but after experiencing 18 months of above average industry losses, we expect that investors will likely want to see rates harden in 2019, especially for loss-impacted tranches. We expect this will be the case particularly for aggregate transactions and those structures exposed to perils with less robust catastrophe models. But, despite a potential hardening scenario we believe the ILS value proposition still rings true as a diversifying and complementary capacity source.


The primary market saw another active year, as total issuance reached USD 9.7bn across 29 transactions and 49 tranches, placing 2018 overall as the second-highest year of issuance volume since the market’s inception, and only 8% down from 2017’s USD 10.5bn.

At a time when new issuance is typically at its lowest as market participants brace themselves for the peak of hurricane season, 3Q 2018 brought in its second-highest issuance for that quarter on record (USD 1.55bn) and nearly doubled the figure for the same period in 2017 (USD 780m). The stellar 3Q was largely attributed to new sponsors NFIP and PG&E issuing their first-ever cat bonds, which covered pure flood and pure wildfire perils, respectively. The fourth quarter was a more subdued period and, even with a new sponsor, Sempra, entering the market for the first time, again with a pure wildfire transaction, 4Q 2018 had a below average level of issuance. In fact, with a total of only USD 536m issued, it was the lowest issuance for any 4Q since 2008 (at the height of the volatility of the financial crisis) when no new bonds were issued. This low level of 4Q issuance can be partly attributed to the lower volumes of European sponsors accessing the market versus previous years (with SCOR being the only such sponsor). A novel atmospheric perils transaction was announced in 4Q, but partly as a result of challenging market conditions experienced toward the end of 2018, that transaction was delayed. This contributed to a lackluster ending to 2018 in the primary market, totaling USD 2.09bn in 2H 2018.

Figure 1: Yearly issuance and outstanding ILS bonds

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USD billion

Issued Previous Outstanding

New issuance

Source: Swiss Re Capital Markets, as of December 31, 2018


Multi-Peril 43%Non-Peak 14%Japan (EQ + Thphoon) 13%US WS 12%US EQ 8%US Flood 5%US WF 3%L&H 2%

2018 Issuance Notional by PerilMulti-Peril Non-Peak Japan US WS UW EQ US Flood US WF L&H

USD (m) 4 150 1 360 1 220 1 179 760 500 325 200


Several sponsors returned to the ILS market in 2H 2018, seeking to renew capacity for maturing tranches. Oak Tree Assurance, through its Bermuda-based SPI, Acorn Re Ltd., issued a USD 400m note covering West Coast North America earthquake coverage on a parametric per-occurrence basis to replenish the USD 300m Acorn Re 2015-1 note that matured in July 2018. The California Earthquake Authority (CEA) replaced its maturing Ursa Re 2015-1 Class B note with another USD 250m, covering California earthquakes on an aggregate indemnity basis. Longtime sponsor United Services Automobile Association (USAA) returned to the market, issuing USD 200m across two new per-occurrence notes, covering multiple US perils across all 50 states. California-based sponsor State Compensation Insurance Fund renewed its Golden State Re II program, issuing a USD 210m Golden State Re II 2018-1 bond, covering workers’ compensation risk caused by California earthquakes on a modeled-loss basis in anticipation of their Golden State Re II 2014-1 Class A notes maturing in early January 2019.

Figure 2: Historical quarterly issuance

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20182017201620152014201320122011201020092008200720062005

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Figure 3: 2018 issuance percentage by peril


Figure 4: 2018 cat-bond issuances

CUSIP/ISIN Deal Pricing date Settlement date Size (USD m) Peril1,2

1Q 201892849LAA3 Vitality Re IX 2018 A 23-Jan-18 29-Jan-18 140 Extreme Morbidity92849LAB1 Vitality Re IX 2018 B 23-Jan-18 29-Jan-18 60 Extreme MorbidityXS1761694949 IBRD CAR 116 2-Feb-18 7-Feb-18 500 Chile EQXS1761702718 IBRD CAR 117 2-Feb-18 7-Feb-18 400 Colombia EQXS1761706388 IBRD CAR 118 A 2-Feb-18 7-Feb-18 160 MEX EQXS1761706891 IBRD CAR 119 B 2-Feb-18 7-Feb-18 100 MEX EQXS1761714721 IBRD CAR 120 2-Feb-18 7-Feb-18 200 Peru EQ62983QAK9 Nakama Re 2018-1 1 22-Feb-18 1-Mar-18 500 JP EQ62983QAL7 Nakama Re 2018-1 2 22-Feb-18 1-Mar-18 200 JP EQ49835KAC7 Kizuna Re II 2018-1 A 16-Mar-18 28-Mar-18 150 JP EQ49835KAD5 Kizuna Re II 2018-1 B 16-Mar-18 28-Mar-18 50 JP EQ00973XAB6 Akibare Re 2018-1 A 22-Mar-18 28-Mar-18 220 JP WS, JP EQ00973XAC4 Akibare Re 2018-1 B 22-Mar-18 28-Mar-18 100 JP WS562012AA2 Manatee Re II 2018-1 A 22-Mar-18 3-Apr-18 160 US WS, ST562012AB0 Manatee Re II 2018-1 B 22-Mar-18 3-Apr-18 40 US WS, ST80000RAJ1 Sanders Re 2018-1 A 23-Mar-18 29-Mar-18 500 US WS, EQ, ST, Fire, Other Peril59012UAD7 Merna Re 2018-1 A 26-Mar-18 29-Mar-18 300 NM EQ2Q 201804227FAA3 Armor Re II 2018-1 10-Apr-18 13-Apr-18 100 US WS, EQ45869RAA3 Integrity Re 2018-1 A 16-Apr-18 23-Apr-18 75 FL WS45869RAB1 Integrity Re 2018-1 B 16-Apr-18 23-Apr-18 4 FL WS494074AH0 Kilimanjaro Re 2018-1 A-1 18-Apr-18 30-Apr-18 62.5 US EQ, WS; CAN EQ, WS494074AJ6 Kilimanjaro Re 2018-1 B-1 18-Apr-18 30-Apr-18 200 US EQ, WS; CAN EQ, WS494074AK3 Kilimanjaro Re 2018-2 A-2 18-Apr-18 30-Apr-18 62.5 US EQ, WS; CAN EQ, WS494074AL1 Kilimanjaro Re 2018-2 B-2 18-Apr-18 30-Apr-18 200 US EQ, WS; CAN EQ, WS48878QAA8 Kendall Re 2018-1 19-Apr-18 25-Apr-18 225 US WS, EQ, WF, EU WS705809AB7 Pelican IV Re 2018-1 A 23-Apr-18 27-Apr-18 100 LA WS12765KAE5 Caelus Re V 2018-1 A 30-Apr-18 10-May-18 125 US WS, EQ, ST, WT, WF, VE, MI

and Other Peril12765KAF2 Caelus Re V 2018-1 B 30-Apr-18 10-May-18 75 US WS, EQ, ST, WT, WF, VE, MI

and Other Peril12765KAG0 Caelus Re V 2018-1 C 30-Apr-18 10-May-18 175 US WS, EQ, ST, WT, WF, VE, MI

and Other Peril12765KAH8 Caelus Re V 2018-1 D 30-Apr-18 10-May-18 75 US WS, EQ, ST, WT, WF, VE, MI

and Other Peril76117UAA1 Residential Re 2018-1 11 30-Apr-18 14-May-18 100 US WS, EQ, ST, WT, WF, MI, VE,

Others76117UAB9 Residential Re 2018-1 13 30-Apr-18 14-May-18 200 US WS, EQ, ST, WT, WF, MI, VE,

Others30014LAC8 Everglades Re II 2018-1 A 8-May-18 15-May-18 250 FL WS10260PAA6 Bowline Re 2018-1 A 9-May-18 16-May-18 250 US WS, EQ, ST; CAN WS, EQ, ST542799AD3 Long Point Re III 2018-1 A 17-May-18 24-May-18 500 US WS, EQ, ST, WT011395AE0 Alamo Re 2018-1 A 23-May-18 30-May-18 400 TX WS04921AAA3 Atlas Capital UK 2018 PLC 25-May-18 31-May-18 300 US WS, EQ, EU WS35922QAA1 Frontline Re 2018-1 A 12-Jun-18 26-Jun-18 250 FL WS, SC WS, NC WS, AL WS35922QAB9 Frontline Re 2018-1 B 12-Jun-18 26-Jun-18 100 FL WS, SC WS, NC WS, AL WS

New issuance


CUSIP/ISIN Deal Pricing date Settlement date Size (USD m) Peril1,2

3Q 2018666842AB5 Northshore Re II 2018-1 A 2-Jul-18 6-Jul-18 200 US WS, EQ, CAN EQ, EU WS00485YAB5 Acorn Re 2018-1 A 3-Jul-18 10-Jul-18 400 US EQ, CAN EQ, MEX EQ33975CAA3 FloodSmart Re 2018-1 A 25-Jul-18 30-Jul-18 325 US FL33975CAB1 FloodSmart Re 2018-1 B 25-Jul-18 30-Jul-18 175 US FL12482PAA4 Cal Phoenix Re 2018-1 A 30-Jul-18 2-Aug-18 200 CA WF90323WAJ9 Ursa Re 2018-1 D 7-Sep-18 14-Sep-18 250 CA EQ only4Q 201878414BAA9 SD Re 2018-1 8-Oct-18 12-Oct-18 125 CA WF76117UAC7 Residential Re 2018-2 1 15-Nov-18 27-Nov-18 50 US WS, EQ, ST, WT, WF, MI, VE,

Others76117UAD5 Residential Re 2018-2 2 15-Nov-18 27-Nov-18 150 US WS, EQ, ST, WT, WF, MI, VE,

Others38123FAB4 Golden State Re 2018-1 28-Nov-18 3-Dec-18 210 US EQ


1 AL = Alabama, CA = California, CAN = Canada, EU = Europe, FL = Florida, JP = Japan, LA = Louisiana, MEX = Mexico, NC = North Carolina, NY = New York, PR = Puerto Rico, SC = South Carolina, TX = Texas, US = United States, US VI = US Virgin Islands

2 EQ = Earthquake, MI = Meteor Impact, ST = Severe Thunderstorm, VE = Volcanic Eruption, WF = Wildfire, WS = Wind Storm, WT = Winter Storm


The 2017 catastrophe events seemed to have little impact on overall issuance prices for 2018. Sponsors generally targeted slightly less risky tranches of notes, with yearly average expected losses declining by 15%, but average spreads also decreased by a similar amount (18%), indicating that expected-loss multiples remained steady year over year.

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Average Issue Spread Average EL

2018

2017

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2007

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4

bps


To further investigate trends on multiples, Figure 6 reviews the impact of trigger basis (aggregate versus per occurrence) and expected loss band on multiples. Multiples across all aggregate bonds increased 63% from 2017; however, this movement is attributed to the Cal Phoenix Re, SD Re, and Sanders Re issuances, which at a lower expected loss carried higher multiples than higher expected loss bonds, and also included novelty premiums due to the nature of the respective underlying perils. The trends for mid- and high-risk levels remained relatively flat for the year. Multiples for per-occurrence transactions trended up slightly, but this was likely the result of the issuance of further novel transactions (like the FloodSmart Re transaction) rather than a market-wide movement.

Figure 5:Yearly average cat-bond expected losses and issue spreads

Primary market pricing


Figure 6: New issue yearly average multiples


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Average Multiple

2018

2017

2016

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All Aggregate Average Multiple

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Average Occurrence Multiples

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2017

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All Per Occurrence Multiples

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12

> 3.75%1.81%–3.75%0.16%–1.80%

2018

2017

2016

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Aggregate Average Multiples by Expected Loss

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> 3.75%1.81%–3.75%0.16%–1.80%

2018

2017

2016

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2007

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6

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4Per Occurrence Average Multiples by Expected loss


2018 maturities

A total of USD 6.4bn across 38 tranches was scheduled to mature in 2018, but due to certain notes being extended or paying out losses to sponsors, only 32 tranches fully matured, amounting to USD 6bn.

Scheduled to mature in January 2018, USD 65m of the Loma Re 2013-1 Class C notes were extended numerous times throughout 2018 and this has continued into 2019.

The impact of Hurricane Irma was felt most strongly by the Citrus series of notes, with six separate tranches experiencing either principal payouts or extension. Citrus Re 2015-1 B had gone into extension past its April maturity date and has experienced multiple principal reductions since May 2018. Citrus Re 2015-1 C was also extended in April and subsequently experienced a full loss of principal in May.

Finally, multiple tranches of the Residential Re program went into extension this year. Expected to mature in June, aggregate covers Residential Re 2014-1 Class 10 and Residential Re 2017-1 Class 10 were extended, locking up USD 130m in capital. Residential Re 2017-1 Class 10 subsequently paid out a full loss in December. And following the wildfire events in the later part of 2018, Residential Re 2017-2 Class 1 also had a full extension of USD 55m principal in 4Q.

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Multiperil L&H Japan EU WS

4Q 3Q 2Q 1Q

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Cumulative Actual Cumulative Scheduled

4Q 3Q 2Q 1Q

223545 425 430

100250300

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1 228

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1 142

2018 Maturities (USD m)1Q 2Q 3Q 4Q Total

Scheduled maturities 1 565 3 298 1 075 430 6 368Loss payments – 128 – – 128Extended 65 130 – 55 250Actual maturities 1 500 3 040 1 075 375 5 990


Figure 7: 2018 expected maturities vs actual maturities

Maturities


Figure 8: 2018 expected maturities

Quarter Deal1 Maturity Date Size (USD m) Peril2,3

1Q Calypso Capital II B January 8, 2018 223 EU WSGalileo Re 2015-1 A January 8, 2018 300 Multi-PerilLoma Re 2013-1 A January 8, 2018 32 Multi-PerilLoma Re 2013-1 B January 8, 2018 75 Multi-PerilLoma Re 2013-1 C* January 8, 2018 65 Multi-PerilTradewynd Re 2014-1 3-A January 8, 2018 100 Multi-PerilTradewynd Re 2014-1 3-B January 8, 2018 300 Multi-PerilVitality Re VI 2015 A January 8, 2018 140 Life and HealthVitality Re VI 2015 B January 8, 2018 60 Life and HealthEast Lane Re VI A March 14, 2018 270 Multi-Peril

2Q Kizuna Re II 2014-1 A April 6, 2018 200 JP EQKizuna Re II 2014-1 B April 6, 2018 45 JP EQCitrus Re 2015-1 A April 9, 2018 150 US HurricaneCitrus Re 2015-1 B** April 9, 2018 98 US HurricaneCitrus Re 2015-1 C** April 9, 2018 30 US HurricaneMerna Re 2015-1 A April 9, 2018 300 US EQNakama Re 2014-1 1 April 13, 2018 150 JP EQNakama Re 2014-1 2 April 13, 2018 150 JP EQPelican III Re 2015-1 April 16, 2018 100 US HurricaneKilimanjaro Re 2014-1 A April 30, 2018 250 US HurricaneKilimanjaro Re 2014-1 B April 30, 2018 200 Multi-PerilEverglades Re II 2015-1 A May 3, 2018 300 US HurricaneLong Point Re III 2015-1 A May 23, 2018 300 Multi-PerilSanders Re 2014-1 B May 25, 2018 330 Multi-PerilSanders Re 2014-1 C May 25, 2018 115 Multi-PerilResidential Re 2014-1 10* June 6, 2018 80 Multi-PerilResidential Re 2014-I 13 June 6, 2018 50 Multi-PerilResidential Re 2017-1 10* June 6, 2018 50 Multi-PerilAlamo Re 2015-1 A June 7, 2018 300 US HurricaneQueen Street X Re June 8, 2018 100 Multi-Peril

3Q Cranberry Re 2015-1 A July 6, 2018 300 US HurricaneTradewynd Re 2013-1 July 9, 2018 125 Multi-PerilAcorn Re Ltd July 17, 2018 300 Multi-PerilBosphorus 2015-1 A August 17, 2018 100 Non-PeakUrsa Re 2015-1 B September 21, 2018 250 US EQ

4Q Residential Re 2014-2 4 December 6, 2018 100 Multi-PerilResidential Re 2017-2 1* December 6, 2018 55 Multi-PerilPennUnion Re 2015-1 A December 7, 2018 275 Multi-Peril


1 * = bonds in extension; ** = bonds in extension and have had principal reductions2 AL = Alabama, CA = California, EU = Europe, FL = Florida, JP = Japan, MEX = Mexico, NC = North Carolina, NY = New York, SC = South Carolina,

TX = Texas, US = United States, US VI = US Virgin Islands3 EQ = Earthquake, WS = Wind Storm


1H 2019 expected cat-bond maturities

The first half of 2019 has USD 3.7bn across 23 tranches of cat bonds expected to mature, excluding bonds that were extended in 2018. January is expected to see the largest volume of bonds maturing in 1H 2019, with USD 1.68bn across 11 tranches. USD 1.6bn of multi-peril risks comprise almost half of bonds maturing, followed by USD 550m of US hurricane, USD 550m of US earthquake, USD 469m of Japan earthquake, USD 380m of life and health, and EUR200m of Europe earthquake-exposed bonds.

In a similar dynamic to 2018, there are a number of bonds however with expected losses from the 2017 and 2018 events that may be extended rather than returning capital to investors, including Atlas 2015-1 A (which has now been confirmed as in extension). Blue Halo 2016-1 B, Citrus 2016-1 D-50 and various Residential Re tranches could also be extended, although this is uncertain as no announcements have been made.

Maturities

Figure 9: 2019 expected maturities

Quarter Deal Maturity Date Size (USD m) Peril1,2

1Q Tramline Re II 2014-1 A January 4, 2019 200 Multi-PerilAtlas Re IX 2015-1 A January 7, 2019 150 Multi-PerilVitality Re V 2014 A January 7, 2019 140 Life & HealthVitality Re V 2014 B January 7, 2019 60 Life & HealthGalileo Re 2016-1 A January 8, 2019 100 Multi-PerilGalileo Re 2016-1 B January 8, 2019 100 Multi-PerilGalileo Re 2016-1 C January 8, 2019 100 Multi-PerilGolden State Re II 2014-1 A January 8, 2019 250 CA EQAzzurro Re I A January 16, 2019 226.74 EU EQNakama Re Ltd 2014-2 1 January 16, 2019 175 JP EQAtlas IX Capital 2013-1 B January 17, 2019 180 Life & HealthCitrus Re 2016-1 D-50 February 25, 2019 109 FL and HI WS

2Q Kizuna Re II Ltd. 2015-1 A April 5, 2019 294 JP EQMerna Re 2016-1 A April 8, 2019 300 NE EQSanders Re 2014-1 D May 28, 2019 305 US WS, US EQResidential Re 2015-1 10 June 6, 2019 50 Multi-PerilResidential Re 2015-1 11 June6, 2019 100 Multi-PerilResidential Re 2018-1 11 June 6, 2019 100 Multi-PerilAlamo Re 2015-1 B June 7, 2019 400 TX WSFirst Coast Re 2016-1 A June 7, 2019 75 FL WS, FL STQueen Street XI June 7, 2019 100 US WS, AU WSBlue Halo Re 2016-1 A June 21, 2019 130 US WS, US EQBlue Halo Re 2016-1 B June 21, 2019 55 US WS, US EQ


1 AL = Alabama, CA = California, EU = Europe, FL = Florida, JP = Japan, MEX = Mexico, NC = North Carolina, NY = New York, PR = Puerto Rico, SC = South Carolina, TX = Texas, US = United States, US VI = US Virgin Islands

2 EQ = Earthquake, WS = Wind Storm


Relative value

Corporate-bond spreads have widened in recent months as late cycle concerns about the state of the US economy, trade tensions and the risk of a recession in 2019 have taken hold. According to the Bank of America Merrill Lynch US High Yield Option-Adjusted Spread indices, spreads on both US B-rated and US BB-rated bonds have reached highs not seen since mid-2016 when the high-yield market sold off as a result of falling oil prices.

US wind-exposed cat bonds have historically traded at a concession to comparable corporate bonds, demonstrating the relative value of cat bonds versus high-yield debt, but the recent widening in B-rated corporate bond spreads has significantly closed the gap to similarly rated cat bonds. The gap has previously been breached only during the aforementioned high-yield sell-off caused by oil-price volatility in 2016.

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US Wind BB

Oct

201

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018

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017

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016

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015

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014

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2014

RatingBofA Merill Lynch US High Yield Avg. OAS1

Insurance-linked securities average spread2,3

BB 3.60% 4.29%B 5.74% 5.80%


1 BofA Merill Lynch High Yield Option Adjusted Spread via the Federal Reserve Bank of St. Louis website.

2 Swiss Re Capital Markets pricing indications only; average seasonally adjusted spread of all ILS bonds with a US Wind component and at least one year left to maturity. US Wind BB Comp = Bonds with EL between 0.15%–1.80% (or that actually have a BB rating, regardless of EL) US Wind B Comp = Bonds with EL between 1.81–3.75% (or that actually have a B rating, regardless of EL)

3 Figure excludes bonds for which seasonally adjusted spread was 25% greater than issuance spread.

Figure 10: US wind comparable secondary spreads (2014–2018)

ILS secondary markets


The increase in cat-bond spreads in late 2018 can be attributed to the need for liquidity by some ILS funds in December. Capital lock-ups and continued pressure on rates in some cases led to fund redemptions spurring a handful of forced sellers in the market as the year drew to a close. Together with a weak quarter of new issuance, 4Q 2018 proved to be a very busy period for trading but at wider spread levels. US wind B-rated spreads widened for eight consecutive weeks from October 31 to December 14, and retracted slightly in the last two weeks of the year. US Wind BB spreads began to widen in mid-November and continued until year-end, reaching levels not seen since 3Q 2016.

At the start of 2019, this trend has somewhat reversed and spreads have since tightened. Maturities in the market returned cash to investors and removed the need for forced sales at discounted prices. This was coupled with the emergence of new investors looking to build a portfolio. The dynamic illustrates the liquidity available in the market and that investors can realize cash from cat bond positions in a short time frame, albeit at slightly discounted levels.

Secondary trading

The latter half of the year saw TRACE-reported trading volumes of more than USD 1.1bn across more than 1,600 TRACE-reported trades. 4Q 2018 was especially active with almost USD 700m traded across more than 1,000 trades.1 The latter part of the year is often a busy period for trading but 2H 2018’s trading volume came in 35% higher than 2H 2017 volumes.

The increase in trading this year was driven by many factors. Some investors have experienced struggles with redemptions, trapped capital, and raising new capital due to the negative effects of the events of the past two years and took to the secondary market to raise capital. In doing so, investors not only offloaded short-dated notes, but longer-dated notes as well.



Aggregate-triggered bonds were traded more often and with higher volumes throughout the year than per-occurrence bonds. Average traded prices for aggregate and per-occurrence bonds in the month of December were 98.74 and 99.08, respectively.

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Volume (m)

12-1

811

-18

10-1

80

9-1

80

8-1

807

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06

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05

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04

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03

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02

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812

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710

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08

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07-1

70

6-1

70

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70

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70

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70

2-1

701

-17


92

94

96

98

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102

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106

Average OccAverage AggAgg and Occ

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Average Price

Par

Source: Trade Reporting and Compliance Engine (TRACE)

1 TRACE-reported trades are capped at USD 1m+, so we have assumed USD 1m for these trades, therefore our volume is an underestimate.

2 Estimates are recorded only for bonds included in Swiss Re Capital Markets secondary pricing.

Aggregate bonds totaled USD 1.24bn in trading volumes for 2018, largely contributed by 2Q and 4Q trading. Aggregate volumes during 4Q reached USD 403m and increased 136% from 4Q 2017. Little trading occurred in loss-affected aggregate bonds (e.g., Caelus Re, Citrus Re, and Residential Re) as their losses are still uncertain.

Figure 11: Monthly TRACE-reported trading volume and average bid prices by trigger basis1,2


Per-occurrence trading volumes totaled USD 931m for the year, trading slightly more during the first half of the year. Trading in per-occurrence bonds occurred principally across lower-risk tranches (EL from 0.16% to 1.8%) and in indemnity multi-peril structures.

0

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100

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300

350

Life & HealthKth EventOccurrenceAggregate

12-1

8

11-1

8

10-1

8

09

-18

08

-18

07-1

8

06

-18

05

-18

04

-18

03

-18

02

-18

01-1

8

12-1

7

11-1

7

10-1

7

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-17

08

-17

07-1

7

06

-17

05

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04

-17

03

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02

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01-1

7


Source: TRACE; Swiss Re Capital Markets

Both indemnity and industry index bonds realized the steepest price discounts throughout December with average bid prices of 98.87 and 98.98, respectively.

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Volume (m)

12-1

811

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10-1

80

9-1

80

8-1

807

-18

06

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05

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04

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03

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02

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01-1

812

-17

11-1

710

-17

09

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08

-17

07-1

70

6-1

70

5-1

70

4-1

70

3-1

70

2-1

701

-17


75

80

85

90

95

100

105

100

110

ParametricIndustry IndexIndemnity

Dec 2018Nov 2018Oct 2018Sep 2018Aug 2018Jul 2018Jun 2018May 2018Apr 2018Mar 2018Feb 2018Jan 2018Dec 2017Nov 2017Oct 2017Sep 2017Aug 2017Jul 2017Jun 2017May 2017Apr 2017Mar 2017Feb 2017Jan 2017

Average Price

Par

Source: TRACE

1 TRACE-reported trades are capped at USD 1m+, so we have assumed USD 1m for these trades and therefore our volume is an underestimate.

2 Estimates are recorded only for bonds included in Swiss Re Capital Markets secondary pricing.

Figure 12: Monthly trading volume by trigger basis

Figure 13: Monthly TRACE-reported trading volume and average bid prices by trigger1,2



Typically, investors turn to the liquidity of the secondary market to sell short-dated notes (<=12 months to maturity) during the last quarter to raise cash, but due to different market dynamics this year (redemptions, trapped capital, maturity schedules, etc.), trades in mid- to long-dated notes ramped up during 4Q 2018. Trading volumes of short-dated notes decreased by 19% while two-to-three year and more-than-three years to maturity notes increased 77% and 99%, respectively, from 4Q 2017. It is clear that the discount and pick-up in yield that investors could receive outweighed significantly the risk of buying and holding longer-dated bonds.

0

50

100

150

200

250

300

350

> 3 Years2–3 Years<= 1 Year

12-1

8

11-1

8

10-1

8

09

-18

08

-18

07-1

8

06

-18

05

-18

04

-18

03

-18

02

-18

01-1

8

12-1

7

11-1

7

10-1

7

09

-17

08

-17

07-1

7

06

-17

05

-17

04

-17

03

-17

02

-17

01-1

7


Source: TRACE; Swiss Re Capital Markets

Cat-bond spread cycle

All secondary fixed-income markets experience their own respective spread cycles, and the cat-bond market is no exception. The ILS bond market has experienced multiple spread regimes since its inception, and over the long term, secondary spreads have been relatively stable with low volatility within those regimes (with the exception of increased volatility in the early aftermath of the financial crisis).

Pre-2012, secondary spreads typically followed a regular cycle of steadily increasing from January to June and going back down again from July to December. The market then was dominated by a handful of risks and wasn’t as liquid as it now, so spreads generally followed seasonal US wind patterns. As time went on, new investors, perils, structures, and geographies entered the market with a step change occurring in 2013. New investors stepped into the marketplace followed by record-breaking issuance in 2013–2014, bringing spreads below their respective 12-year averages. The pattern of intra-year spread development has also become more irregular as trading dynamics influence the levels of spreads more significantly than seasonal patterns alone.

Figure 14: Monthly trading volume by time to maturity


The last two months of 2018 saw secondary spreads widening. This may be indicative of a potential market regime change as committed investors rebounded from two consecutive years of above average large nat-cat events and demanded higher spreads for the level of risk taken. Alternatively, the spread widening in late 2018 may have been solely driven by some sellers who were willing to accept lower prices to realize liquidity. Trading activity in early 2019 suggests the latter is more likely to be the case, as we have already seen spreads tighten and the latest market color suggests a dynamic with more willing secondary buyers than sellers.


Figure 15: US wind BB-rated historical spreads and regime changes1,2,3,4


1 Swiss Re Capital Markets pricing indications only; average seasonally adjusted spread of all ILS bonds with a US Wind component and at least one year left to maturity.

2 US Wind BB Comp = Bonds with EL between 0.15%–1.80% (or that actually have a BB rating, regardless of EL)3 US Wind B Comp = Bonds with EL between 1.81%–3.75% (or that actually have a B rating, regardless of EL)4 Figure excludes bonds for which seasonally adjusted spread was 25% greater than issuance spread.

12.5%

11.5%

10.5%

9.5%

8.5%

7.5%

6.5%

5.5%

4.5%

3.5%

2.5%

Jan

2007

Jul 2

007

Jan

200

8

Jul 2

00

8

Jan

200

9

Jul 2

00

9

Jan

2010

Jul 2

010

Jan

2011

Jul 2

011

Jan

2012

Jul 2

012

Jan

2013

Jul 2

013

Jan

2014

Jul 2

014

Jan

2015

Jul 2

015

Jan

2016

Jul 2

016

Jan

2017

Jul 2

017

Jan

2018

Jul 2

018

SecondarySpread Financial Crisis

Insufficient capital flowspost 2011 events Spreads stabilising Post HIM

Post Hurricane Florence,Michael and

2018 CaliforniaWildfires

0.16%–1.80% 12 Year Average 2007–2013 Average 2014–2018 Average


Figure 16: US wind B-rated historical spreads and regime changes1,2,3,4


1 Swiss Re Capital Markets pricing indications only; average seasonally adjusted spread of all ILS bonds with a US Wind component and at least one year left to maturity.

2 US Wind BB Comp = Bonds with EL between 0.15%–1.80% (or that actually have a BB rating, regardless of EL)3 US Wind B Comp = Bonds with EL between 1.81%–3.75% (or that actually have a B rating, regardless of EL)4 Figure excludes bonds for which seasonally adjusted spread was 25% greater than issuance spread.

16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

Jan

2007

Jul 2

007

Jan

200

8

Jul 2

00

8

Jan

200

9

Jul 2

00

9

Jan

2010

Jul 2

010

Jan

2011

Jul 2

011

Jan

2012

Jul 2

012

Jan

2013

Jul 2

013

Jan

2014

Jul 2

014

Jan

2015

Jul 2

015

Jan

2016

Jul 2

016

Jan

2017

Jul 2

017

Jan

2018

Jul 2

018

SecondarySpread Financial Crisis

Insufficient capital flowspost 2011 events Spreads stabilising Post HIM

Post Hurricane Florence,Michael and

2018 CaliforniaWildfires

1.81%–3.75% 12 Year Average 2007–2013 Average 2014–2018 Average


The Swiss Re Global Cat Bond Total Return Index (SRGLTRR) experienced positive monthly returns until October, followed by a run of three negative months to close 2018 (an infrequent occurrence for the index). In Q4, the market reacted to the aftermath of Hurricanes Florence and Michael, but a more pronounced impact was felt by the spread widening previously discussed in this report. The SRGLTRR ended the year up, with a total return of 2.81% for 2018. Coupon returns were 6.14% for the year and kept the index in positive territory despite event and mark-to-market losses caused by the spread widening.

Cumulative Return

–10%

–8%

–6%

–4%

–2%

0%

2%

4%

6%

S&P 500 Barclays SRGLTRR

DecNovOctSepAugJulJunMayAprMarFebJan

Figure 17: Swiss Re Global Cat Bond Total Return Index relative value (cumulative returns)

Swiss Re cat-bond indices

2018 SRGLTRR Monthly Returns1Q 2Q 3Q 4Q

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecSRGLTRR 1.32% 0.20% 0.23% 0.65% 0.65% 0.13% 0.68% 0.35% 0.15% –0.05% –0.94% –0.58%Barclays 0.04% –1.11% –0.54% 0.13% –0.37% 0.07% 1.13% 0.92% 0.26% –1.37% –0.25% –1.31%S&P 500 5.73% –3.69% –2.54% 0.38% 2.41% 0.62% 3.72% 3.26% 0.57% –6.84% 2.04% –9.03%

Source: Swiss Re Capital Markets, as of December 31, 2018; Barclays US Corporate High Yield Bond Index; and S&P 500 Index sourced from Bloomberg.


While ILS returns for 2018 were moderately low when compared to historical returns for the asset class, it is interesting to note that the SRGLTRR index finished with a positive performance in 2017 and 2018, despite two years of higher catastrophe activity. This illustrates once again the attractiveness to investors of a strategic allocation to ILS. Moreover, in 2018, the total returns for global ILS securities distinctly outperformed other asset classes. The Barclays U.S. Corporate High Yield Index ended the year at –2.41%, and the S&P 500 Index (SPX) closed at –4.38%. The comparable returns from the SRGLTRR, SPX, and the Barclays U.S. Corporate High Yield Index demonstrates the ILS market still continues to offer value as a diversifying asset class in the capital markets, even through two substantially loss-affected years.

0%

2%

4%

6%

8%

10%

12%

14%

16%

2018

2017

2016

2015

2014

2013

2012

2011

2010

200

9

200

8

2007

200

6

200

5

200

4

200

3

200

2

8.7%

7.1% 6.6%

1.6% 2.3%

12.0%

15.4%

13.5%

11.3%

3.7%

10.2%10.9%

6.1%

4.2%

6.6%

2.8%

0.5%


Figure 18: Swiss Re Global Cat Bond Total Return Index yearly returns


Out of the total USD 9.7bn issued, USD 4.9bn were aggregate triggered covers in 2018, down 19% from the 2017 level of aggregate issuance. Per-occurrence structures meanwhile saw a year-on-year increase in issuance volume of about 7% in 2018. Some investors have voiced concerns about the additional risks aggregate structures carry, in particular the frequency assumptions of qualifying events. If this focus results in the widening of spreads for aggregate transactions, sponsors may perceive relative value in the issuance of per-occurrence structures, which could continue the trend of elevated per-occurrence bond issuance in the primary market in 2019.

Parametric triggers have made a significant comeback to the market in the last two years. Driven mainly by the World Bank issued Pacific Alliance deal, USD 1.8bn of notes were issued with parametric triggers, comprising an estimated 18% of the bonds issued in 2018, nearly doubling the seven-year average of parametric notes issued. Indemnity triggers continue to comprise more than half the deals issued year-on-year, with USD 6.2bn in 2018, down 6% from the volume of indemnity bonds issued in 2017. Industry-index triggers, meanwhile, experienced the steepest decline in 2018, at USD 1.5bn, down 52% from the USD 3.1bn issued in 2017. It is worth noting many reinsurer sponsors utilize industry-index triggers (and as reinsurers were less active in the primary market for 2018), industry-index trigger issuances were down.

Since 2016, collateral structures for deals have been split almost 50–50 between money-market funds and structured notes, a trend that continued in 2018. Structured notes totaled USD 4.7bn,1 split between IBRD (USD 3.7bn) and ERBD (USD 1.1bn) collateral, while Treasury money-market fund notes amounted to USD 5bn in 2018.

A diverse group of sponsors sought capacity from the ILS market in 2018. Primary-insurance sponsors continued to lead the market with a total issuance USD 4.4bn of notes. Government sponsors looked to the ILS market once again while issuing a total of USD 2.1bn, slightly up from 2017’s USD 2bn. Reinsurer-sponsor issuance has contracted from previous years, with only USD 1.5bn of notes issued to provide protection to Scor, TransRe, Aspen Re, Everest Re and Axis. This marks a 52% decrease in notes issued from reinsurers in 2017 and is 13% below the previous six-year average. Corporate-sponsor issuance increased significantly, with USD 725m issued, which is nearly five times the volume issued in 2017 and more than double the six-year average of USD 300m.

1 Total does not add up exactly due to rounding.

Sector data


Figure 19: Yearly sector data


Yearly Percentage by Trigger Basis

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

OccurrenceLife & Health

Kth EventAggregate

20182017201620152014201320120%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CorporateResidual

GovernmentReinsurerInsurer

2018201720162015201420132012

Yearly Percentage by Sponsor Type

Yearly Percentage by Trigger

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

OtherLife & HealthCombination

ParametricIndustry IndexIndemnity

20182017201620152014201320120%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Structured NotesMMF

2018201720162015201420132012

Yearly Percentage by Collateral Type


(As of December 31, 2018)

Bond CUSIP/ISINIssue Size

(USD m)Stated Coupon

(bps)Expected Loss

(bps)Acorn Re 2018-1 A 00485YAB5 400 275 81Akibare Re 2016-1 A 00973XAA8 200 250 119Akibare Re 2018-1 A 00973XAB6 220 190 73Akibare Re 2018-1 B 00973XAC4 100 190 99Alamo Re 2015-1 B 011395AC4 400 460 158Alamo Re 2017-1 A 011395AD2 400 375 188Alamo Re 2018-1 A 011395AE0 400 325 181Aozora Re 2016-1 A 037401AC0 220 220 90Aozora Re 2017-1 A 037401AD8 480 200 114Armor Re II 2018-1 A 04227FAA3 100 350 127Atlas Capital UK 2018 PLC ISPV1 04921AAA3 300 600 333Atlas Re IX 2015-1 A 049382AC8 150 700 376Atlas Re IX 2016-1 A 049382AD6 300 750 329Azzurro Re I A XS1244819022 227 215 31Benu Capital A XS1219733083 146 255 64Benu Capital B XS1219733240 162 335 133Blue Halo Re 2016-1 A 095538AA2 130 1400 856Blue Halo Re 2016-1 B 095538AB0 55 1975 1319Blue Halo Re 2016-2 C 095538AC8 225 825 449Bonanza Re 2016-1 A 09785EAA9 150 375 180Bonanza Re 2016-1 B 09785EAB7 50 500 269Bowline Re 2018-1 A 10260PAA6 250 450 181Buffalo Re 2017-1 A 119798AA4 105 325 131Buffalo Re 2017-1 B 119798AB2 60 675 446Caelus Re IV 2016-1 A 12765JAA6 300 550 194Caelus Re V 2017-1 A 12765KAA3 75 325 95Caelus Re V 2017-1 B 12765KAB1 150 450 185Caelus Re V 2017-1 C 12765KAC9 75 650 355Caelus Re V 2017-1 D 12765KAD7 75 925 577Caelus Re V 2018-1 A 12765KAE5 125 350 80Caelus Re V 2018-1 B 12765KAF2 75 450 186Caelus Re V 2018-1 C 12765KAG0 175 750 364Caelus Re V 2018-1 D 12765KAH8 75 1050 585Cal Phoenix Re Ltd 2018-1 A 12482PAA4 200 750 101Citrus Re 2016-1 D-50 177510AF1 150 750 331Citrus Re 2016-1 E-50 177510AG9 100 1050 629Citrus Re 2017-1 A 177510AH7 125 600 365Citrus Re 2017-2 A 177510AJ3 35 1075 734Cranberry Re 2017-1 A 224287AB8 350 200 47East Lane Re VI 2015-1 A 27332QAB0 250 375 134Everglades Re II 2017-1 A 30014LAB0 300 500 228Everglades Re II 2018-1 A 30014LAC8 250 475 193First Coast Re 2016-1 A 31970LAA2 75 400 131First Coast Re 2017-1 A 31970LAB0 175 425 201FloodSmart Re Ltd 2018-1 B 33975CAB1 175 1350 632FloodSmart Re Ltd. 2018-1 A 33975CAA3 325 1125 494Fortius Re II 2017-1 1 34961KAA9 100 375 119Frontline Re Ltd 2018-1 A 35922QAA1 250 700 404Frontline Re Ltd 2018-1 B 35922QAB9 100 1175 813

Outstanding securities




(bps)Expected

Loss (bps)Galilei Re 2016-1 A-1 363543AA7 75 1325 955Galilei Re 2016-1 B-1 363543AB5 125 800 498Galilei Re 2016-1 C-1 363543AC3 175 625 302Galilei Re 2016-1 D-1 363543AD1 175 525 203Galilei Re 2016-1 E-1 363543AE9 200 450 145Galilei Re 2017-1 A-2 363543AF6 50 1325 955Galilei Re 2017-1 B-2 363543AG4 50 800 498Galilei Re 2017-1 C-2 363543AH2 150 625 302Galilei Re 2017-1 D-2 363543AJ8 150 525 203Galilei Re 2017-1 E-2 363543AK5 125 450 145Galileo Re 2016-1 A 36354TAC6 100 1350 952Galileo Re 2016-1 B 36354TAD4 100 900 496Galileo Re 2016-1 C 36354TAE2 100 700 309Galileo Re 2017-1 A 36354TAF9 75 750 368Galileo Re 2017-1 B 36354TAG7 75 1750 1066Golden State Re II 38123FAA6 250 220 25Golden State Re II 2018-1 38123FAB4 210 220 14Hexagon Re DAC A XS1735822774 53 800 675Hexagon Re DAC B XS1735822857 53 650 552Horse Capital I DAC A XS1534122194 88 400 132Horse Capital I DAC B XS1534122434 88 625 290Horse Capital I DAC C XS1534122517 88 1200 590IBRD CAR 111 A XS1641101172 225 690 357IBRD CAR 112 B XS1641101503 95 1150 774IBRD CAR 114 B XS1654183364 100 930 577IBRD CAR 115 C XS1654184099 110 590 396IBRD CAR 116 XS1761694949 500 250 86IBRD CAR 117 XS1761702718 400 300 156IBRD CAR 118 Class A XS1761706388 160 250 79IBRD CAR 119 Class B XS1761706891 100 825 654IBRD CAR 120 XS1761714721 200 600 500Integrity Re 2017-1 A 45833UAA9 72 325 89Integrity Re 2017-1 B 45833UAB7 3 1450 1130Integrity Re 2017-1 C 45833UAC5 100 400 158Integrity Re 2017-1 D 45833UAD3 35 425 189Integrity Re 2018-1 A 45869RAA3 75 375 146Integrity Re 2018-1 B 45869RAB1 4 950 641Kendall Re 2018-1 A 48878QAA8 225 525 264Kilimanjaro II Re 2017-1 A-1 49407QAA6 225 1000 634Kilimanjaro II Re 2017-1 B-1 49407QAB4 400 750 421Kilimanjaro II Re 2017-1 C-1 49407QAC2 325 600 286Kilimanjaro II Re 2017-2 A-2 49407QAD0 50 1000 634Kilimanjaro II Re 2017-2 B-2 49407QAE8 75 750 421Kilimanjaro II Re 2017-2 C-2 49407QAF5 175 600 286Kilimanjaro Re 2014-2 C 494074AE7 500 375 146Kilimanjaro Re 2015-1 D 494074AF4 300 925 525Kilimanjaro Re 2015-1 E 494074AG2 325 675 300Kilimanjaro Re 2018-1 A-1 494074AH0 63 1250 950Kilimanjaro Re 2018-1 B-1 494074AJ6 200 465 235Kilimanjaro Re 2018-2 A-2 494074AK3 63 1250 950Kilimanjaro Re 2018-2 B-2 494074AL1 200 465 235




(bps)Expected

Loss (bps)Kizuna Re II 2018-1 A 49835KAC7 150 188 12Kizuna Re II 2018-1 B 49835KAD5 50 250 99Lion II Re XS1635674663 228 300 224Long Point Re III 2018-1 A 542799AD3 500 275 129Manatee Re 2018-1 A 562012AA2 160 425 126Manatee Re 2018-1 B 562012AB0 40 775 463Merna Re 2016-1 A 59012UAB1 300 225 41Merna Re 2017-1 A 59012UAC9 300 200 43Merna Re 2018-1 A 59012UAD7 300 200 52Metrocat Re 2017-1 A 59165HAB5 125 370 245Nakama Re 2014-2 1 62983QAE3 200 288 70Nakama Re 2015-1 1 62983QAF0 100 288 116Nakama Re 2015-1 2 62983QAG8 200 325 86Nakama Re 2016-1 1 62983QAH6 550 220 49Nakama Re 2016-1 2 62983QAJ2 150 325 147Nakama Re 2018-1 1 62983QAK9 500 200 49Nakama Re 2018-1 2 62983QAL7 200 300 144Nakama Re Ltd 2014-2 Class 1 62983QAD5 175 213 58Northshore Re II 2017-1 A 666842AA7 350 725 467Northshore Re II 2018-1 A 666842AB5 200 770 486Pelican IV Re 2017-1 A 705809AA9 100 225 96Pelican IV Re 2018-1 A 705809AB7 100 225 108Queen Street XI 74825WAA5 100 615 286Queen Street XII 74825RAA6 190 525 290Residential Re 2015-1 10 76118DAA8 50 1100 728Residential Re 2015-1 11 76118DAB6 100 600 250Residential Re 2015-2 3 76118DAC4 125 725 365Residential Re 2016-1 10 76118GAA1 65 1150 880Residential Re 2016-1 11 76118GAB9 75 475 247Residential Re 2016-1 13 76118GAC7 110 325 73Residential Re 2016-2 3 76118GAE3 150 525 329Residential Re 2016-2 4 76118GAF0 170 350 172Residential Re 2017-1 11 76118XAB2 225 475 243Residential Re 2017-1 13 76118XAC0 150 300 68Residential Re 2017-2 2 76118XAE6 110 1250 835Residential Re 2017-2 3 76118XAF3 130 550 324Residential Re 2018-1 111 76117UAA1 100 – 854Residential Re 2018-1 13 76117UAB9 200 325 98Residential Re 2018-2 11 76117UAC7 50 – 1566Residential Re 2018-2 2 76117UAD5 150 1150 736Riverfront Re 2017-1 A 76870YAB8 143 450 109Riverfront Re 2017-1 B 76870YAC6 48 625 258Sanders Re 2014-1 D 80000RAE2 305 390 128Sanders Re 2017-1 A 80000RAG7 375 300 97Sanders Re 2017-2 A 80000RAH5 200 325 84Sanders Re 2018-1 A 80000RAJ1 500 550 71SD Re 2018-1 A 78414BAA9 125 400 21Spectrum Capital 2017-1 A 84763LAA2 160 575 305Spectrum Capital 2017-1 B 84763LAB0 270 350 88Tailwind Re 2017-1 A 87403TAA4 150 725 379Tailwind Re 2017-1 B 87403TAB2 150 900 494

Outstanding securities




(bps)Expected

Loss (bps)Tailwind Re 2017-1 C 87403TAC0 100 1100 629Torrey Pines Re 2017-1 A 89141WAA0 45 300 126Torrey Pines Re 2017-1 B 89141WAB8 66 375 208Torrey Pines Re 2017-1 C 89141WAC6 55 625 414Tramline Re II 2014-1 A 89289YAB6 200 975 571Ursa Re 2016-1 A 90323WAD2 500 400 218Ursa Re 2017-1 B 90323WAE0 425 350 111Ursa Re 2017-1 E 90323WAF7 500 600 333Ursa Re 2017-2 C 90323WAG5 200 400 132Ursa Re 2017-2 D 90323WAH3 200 525 279Ursa Re 2018-1 D 90323WAJ9 250 510 287Vita Capital VI 2015-1 A 92846DAA4 100 290 99Vitality Re IX 2018 A 92849LAA3 140 160 1Vitality Re IX 2018 B 92849LAB1 60 175 16Vitality Re V 2014 A 92848GAA5 140 175 1Vitality Re V 2014 B 92848GAB3 60 250 21Vitality Re VII 2016 A 92848XAA8 140 215 1Vitality Re VII 2016 B 92848XAB6 60 265 18Vitality Re VIII 2017 A 92848LAA4 140 175 1Vitality Re VIII 2017 B 92848LAB2 60 200 19


1 Zero-coupon bonds


For more information

Specialists throughout Swiss Re Capital Markets are available for consultation on bespoke ILS solutions, and they invite a dialogue on the subject with sponsors and investors alike. For more information, please contact any of the individuals listed below.

Distribution and Trading Judy Klugman – New YorkSwiss Re Capital Markets Corp+1 212 317 [email protected]

Origination and Structuring Jean Louis Monnier – LondonSwiss Re Capital Markets Ltd+44 20 7933 [email protected]

Andy Palmer – LondonSwiss Re Capital Markets Ltd+44 20 7933 4151 [email protected]

Philippe Kremer – New YorkSwiss Re Capital Markets Corp+1 917 368 [email protected]


Risk factors

An investment in Insurance-Linked Securities involves potentially significant risks for an investor. In summary, these risks include (but aren’t limited to): Investors may lose all or a portion of their investment in Insurance-Linked Securities if

a natural catastrophe or other event triggers a payment by the issuer of the Insurance-Linked Securities under the underlying risk-transfer agreement to which the Insurance-Linked Securities relate.

The maturity of the Insurance-Linked Securities may be extended without the prior consent of the investor.

The Insurance-Linked Securities may be redeemed before their maturity date (including before any extension of such maturity date by the issuer).

If the Insurance-Linked Securities are redeemed before maturity, the interest rate payable to you under the Insurance-Linked Securities will be reduced.

Investors have limited recourse to assets of the issuer of the Insurance-Linked Securities and no recourse to assets of the counterparties to the underlying risk-transfer agreements to which the Insurance-Linked Securities relate.

If the issuer of the Insurance-Linked Securities becomes insolvent, investors may lose some or all of their investment.

Investors may be required to consolidate the issuer for accounting purposes under certain circumstances.

An investment in the Insurance-Linked Securities may have adverse tax consequences for investors.

Any claim you have against the issuer in the event of the issuer’s insolvency will rank below any claim a counterparty to the underlying risk-transfer agreements, to which the Insurance-Linked Securities relate, has against the issuer.

Enforcement of security interest granted to a Trustee for the benefit of the investors may be limited.

The Insurance-Linked Securities may not have a secondary market or the secondary market for the Insurance-Linked Securities may have limited liquidity and the market and market price of the Insurance-Linked Securities in the secondary market may be highly volatile.

The Rating Agenc(y)(ies) (if any) may change any rating assigned to the Insurance-Linked Securities. Any credit rating given in respect of the Insurance-Linked Securities may not reflect the potential impact of all risks related to the Insurance-Linked Securities. A credit rating is not a recommendation to buy, sell or hold the Insurance-Linked Securities and may be revised or withdrawn by the rating agency at any time.

The risk factors relating to an investment in Insurance-Linked Securities are set out in detail in the offering circular for the relevant Insurance-Linked Securities. You should consult this information when considering any investment activity.


Disclaimer

This information is issued by Swiss Re Capital Markets Corporation (“SRCM Corp.”) and Swiss Re

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© 2019 Swiss Re. All rights reserved.

Title: Insurance-Linked Securities Market update Volume XXX, February 2019

Contributors: Christopher Cote and Edward Johnson

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Insurance-Linked Securities market update7467c134-2803-42f3... · underscored the cat-bond market’s merit by providing consistent liquidity while also demonstrating that committed