Innovation helps ILS & cat bonds continue to beat records : Aon Benfield

by Artemis on April 15, 2015

The insurance-linked securities (ILS) market’s ability to structure innovative transactions has helped it to continue to break records, with a new high for first-quarter ILS and catastrophe bond issuance being seen in 2015, said Aon Benfield Securities.

Aon Benfield Securities (ABS) recognises Q1 2015 catastrophe bond and ILS issuance as reaching a new record, $1.7 billion by its reckoning. This is below Artemis’ Q1 2015 issuance figure of almost $2.1 billion as ABS does not include the private cat bond or cat bond lite transactions that we cover in our reports and database.

ABS has published its Q1 2015 ILS market report today, citing record first-quarter issuance levels of $1.7 billion, from seven property catastrophe bonds and one health ILS transaction.

Paul Schultz, Chief Executive Officer of Aon Benfield Securities, commented on the record quarter; “Several records were set in the ILS market during 2014, and 2015 has continued in the same vein, with a record first quarter issuance total, and a consistently high level of transactions on-risk.”

Catastrophe bond issuance by quarter

Catastrophe bond issuance by quarter - Source: Aon Benfield Securities

One factor that keeps driving records in the ILS and cat bond space is the continued interest from institutional investors in accessing insurance and reinsurance risks as an asset class. This is despite reduced pricing in reinsurance and ILS, which has not deterred investors from the sector.

Schultz continued; “There remains strong interest in the market from sponsors, and from investors who, despite having accepted decreased interest spreads, continue to allocate high volumes of capital to primary issuances.”

The other factor driving issuance forwards in ILS and catastrophe bonds is the continued innovation within the market. Participants continue to strive to meet both cedents and investors needs, with new and innovative features that allow the coverage that ILS and cat bonds provide to be more closely matched to cedents needs.

“The ongoing success of the sector is partly being driven by the structuring of innovative transactions, for which we continue to see new perils, territories, and structural features being added to address individual risk requirements,” Schultz explained.

At the end of the first-quarter of 2015 ABS recorded a shrinking of the market down to $22.1 billion, again lower than Artemis’ figure of $23.066 billion due to our inclusion of cat bond lite deals.

However the shrinking of the outstanding market was understandable as around $4 billion of cat bonds came off-risk during the quarter, a record maturing volume in such a short space of time.

Aon Benfield Securities latest ILS market report can be accessed via its website here.


Artemis’ Q1 2015 Catastrophe Bond & ILS Market Report – The biggest first quarter ever

Catastrophe bond market reportWe’ve now published our Q1 2015 catastrophe bond & ILS market report.

This report reviews the catastrophe bond and insurance-linked securities (ILS) market at the end of the first-quarter of 2015, looking at the new risk capital issued and the composition of the cat bond & ILS transactions completed during Q1 2015.

Download your copy here.

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