11 September 2015ILS

New records set in ILS market: Aon Securities

A number of new records have been set in the insurance-linked securities (ILS) market over the past 12 months to June 30, 2015.

This is the finding of Aon Securities, the investment banking division of Aon Benfield, in its latest report which analyses the key trends witnessed in the past 12 months.

Catastrophe bond coverage reached a $24 billion year-end high, despite a decrease in catastrophe bond issuance to $7 billion, compared with the record-breaking prior year of $9.4 billion. However, this was still the third highest annual issuance in the sector’s history.

The new records include a record first quarter issuance of $1.7 billion across eight transactions.

There was a record average transaction size of $279 million for any 12-month period ending June 30 and a record number of catastrophe bonds on-risk ($23.5 billion) for a June 30 period end.

Throughout the period, 25 transactions closed, including two life and health transactions, and $5.9 billion of bonds matured.

According to Aon Securities, US exposures continued to dominate the catastrophe bond market, with 22 of the 25 transactions comprising US risk in some capacity. Dedicated Japan risk was covered in two transactions and stand-alone Europe risk in one transaction.

Over the year, eight quota share sidecar transactions closed, totalling $955 million for the seven sidecars that disclosed their sizes and the ILW market increased from $3.5 billion to an estimated $4 billion.

Paul Schultz, chief executive officer of Aon Securities, said: “The decrease in catastrophe bond issuance during the 12 months was in part due to the reaction of the traditional and collateralised reinsurance players to the heightened competition from the catastrophe bond market.

“This reduction was offset by a sizeable increase in collateralised reinsurance participation. We forecast $6 billion to $7 billion in ILS issuance during calendar year 2015, and expect current pricing trends to continue into 2016 in the absence of substantial catastrophic events that disrupt the supply of capital.”