The 12 months to June 30 2020 saw a strong return to growth in the cat bond market, according to Aon, after a below average performance in the previous year.
Aon noted that three of the quarters in the period saw consistent and strong issuance, with Q3 2019 being the exception.
Q4 saw a record issuance of $2.2 billion, while Q1 2020 set another record of $4 billion. Q2 2020 saw strong issuance of $2.8 billion, which was dampened by the effects of COVID-19, driving a temporary pause in primary issuances across the insurance linked securities market.
In total, $9 billion was placed in the year in review, including life and health, Aon said.
Aon said the year had also been notable for attracting new sponsors and repeat issuers, as well as an expansion of perils and geographies. “We expect similar innovation to continue in the ILS market as the years progress, with perils like business interruption or cyber in the short to medium term,” Aon said.
Aon pointed to a shift in placement timing around ILS deals, which it said reflects “the increasing value of the catastrophe bond market outside of the typical insurance and reinsurance sponsors.”
Aon also highlighted the resilience of the ILS market during the early months of the COVID-19 pandemic. “The strong performance of the uncorrelated assets made this market a source of fresh capital to take advantage of distressed asset valuations,” Aon said. “The ILS market reacted positively, with capital meeting selling pressure, driving only modest price movements, even at the very worst of the market.”
Aon, Insurance linked securities, Cat bonds