Aon launches CATstream to streamline catastrophe bond issuance

by Artemis on June 18, 2014

Big news today as Aon Benfield Securities announces the launch of CATstream, a product offering designed to streamline issuance of catastrophe bonds and access to the capital markets for its clients.

CATstream is launched today, by the investment banking and capital markets arm of reinsurance broker Aon Benfield. Through the new CATstream facility ABS aims to provide its clients and cedents with faster and more efficient access to capital markets backed, fully-collateralized reinsurance and retrocession capacity for catastrophe risk.

With CATstream Aon Benfield Securities is trying to standardise some of the catastrophe bond issuance tasks, to make the process swifter and less onerous. Any such efforts are likely to be well-received by the existing cat bond and ILS market sponsors, as well as by those looking at the market but daunted by the work required to sponsor a deal.

CATstream features template documentation and pre-agreed wordings for cat bonds, which Aon Benfield Securities says will allow catastrophe bonds to be established in less than half the time of a non-standard product.

That’s a very impressive claim, which if seen to be true will really help to stimulate the continued expansion and growth of the catastrophe bond market. Standardisation has long been cited as a holy grail which would allow cat bonds to become truly competitive with traditional reinsurance across many classes of business and geographies.

CATstream could be just the boost the cat bond market needs to achieve its next phase of growth. Coupled with issuance facilities established to lower issuance costs, anything that makes the process faster, cheaper and easier will also stimulate further ILS market growth.

Faster access to the capital markets for reinsurance capacity will allow cedants to take advantage of additional risk transfer capacity in note form, said Aon Benfield Securities in its announcement on the launch of CATstream.

With CATstream Aon Benfield Securities also hopes to facilitate the domiciliation of special purpose insurers (SPIs), with Bermuda and Ireland two domiciles currently available to users of the new facility.

The documentation developed for CATstream has been reviewed and approved by service providers and regulators, which will help transactions to be issued more quickly and with lower frictional costs, said Aon Benfield Securities.

The CATstream facility will allow the use of structures using index and indemnity trigger that relate to a broad range of perils and territories, helping users to enjoy capacity diversification, multi-year capacity as well as multi-year known pricing.

Paul Schultz, Chief Executive Officer of Aon Benfield Securities, commented on the launch; “We are launching CATstream at a time when the insurance-linked securities market is showing continued strength; where sponsor and investor demand for ILS products is at an all-time high. We believe that this facility can only promote the growth of the market, by enabling sponsors to secure capital markets coverage within a short timeframe for the structuring of products in strong and proven domiciles at lower frictional costs.”

We look forward to seeing how CATstream contributes to the continued growth of the ILS and catastrophe bond market. With a market player as large as Aon behind it the facility is sure to see some success and will likely be an attractive option for any sponsor looking to utilise a catastrophe bond to access the capital markets.

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