Bermuda leads in ILS innovation
Cat bond issuance in the first quarter of 2018 hit a new record for the quarter, coming in at $3.58 billion, according to Aon Securities in its Insurance-Linked Securities Q1 2018 Update.
The report on the insurance-linked securities (ILS) sector said that catastrophe bond issuance during Q1 totalled 10 transactions – a new high for first quarter issuance that easily surpassed the 2016 and 2017 issuance volumes of approximately $2.2 billion.
“The first quarter catastrophe bond issuance figure has set a positive tone for the remainder of 2018,” said Paul Schultz, chief executive officer of Aon Securities. “Following the potential losses that could have been incurred from the series of 2017 natural disaster events, investors in this sector could easily have taken a ‘wait-and-see’ approach. However, given the record levels of issuance seen during the first three months of the year, it is clear they are aware of the inherent value of ILS and are comfortable with the associated risks.”
According to the report repeat sponsors led the first quarter in terms of issuance volume, sponsoring $2.28 billion of property catastrophe bonds.
Maturing property catastrophe bonds totalled $1.37 billion during the period – which were not only easily replaced, but also significantly expanded, bringing the market to a new high of $29.0 billion of catastrophe bonds on-risk as at March 31, 2018, of which $27.3 billion were property transactions.
In addition according to the report the first three months of the year saw the ILS market expand into new areas – both in terms of geography and perils covered.
In February, a multi-country catastrophe bond was launched on behalf of the World Bank, providing coverage for Latin America through the International Bank for Reconstruction and Development CAR program issuances.
At the same time the Sanders Re catastrophe bond on behalf of insurer Allstate comprised coverage that was consistent with a traditional reinsurance placement and included a unique structural feature, with coverage being both on a per-occurrence and annual aggregate basis, in two separate sections of a single class of notes.
Aon Securities, ILS, market, catastrophe bonds, first quarter, 2018 record, issuance