Records, growth for ILS & collateralized reinsurance market in 2014: Aon

This year has seen records fall across the catastrophe bond and insurance-linked securities (ILS) sector, with the highest ILS issuance seen as well as a record amount of collateralized reinsurance capacity put to work, making 2014 a banner year for the sector.

Aon Benfield Securities (ABS), the capital markets and ILS unit of insurance and reinsurance broker Aon, joins us in announcing the record level of issuance of new catastrophe bonds and ILS in 2014. As ever, Aon’s figures are slightly behind ours, due to our inclusion of some private cat bond transactions in the Artemis Deal Directory.

ABS has recorded $8.03 billion of property catastrophe bond issuance during the year 2014, compared to our total of $8.518 billion of property catastrophe bonds and $200m from the one health linked transaction, the Vitality Re bond in January, which gives us our total of $8.718 billion for 2014 issuance.

The total recorded by ABS makes 2014 a record year, beating the 2007 total of $7.86 billion of property catastrophe bonds that had been the previous record. Read our article from the day 2014 issuance surpassed 2013 earlier this month.

So 2014 has seen the biggest catastrophe bond ever issued, the record quarter with Q2 2014 seeing more issuance than any single quarter since the market began, which resulted in a record first-half, a record year and also a record size for the outstanding market, which ABS put at $22.7 billion at the end of November. Note, we put the outstanding market as $23.931 billion today.

Paul Schultz, Chief Executive Officer of Aon Benfield Securities, commented on the record year; “The inflows of alterative capital into the reinsurance industry over the past two years have been well reported, and in 2014 we have seen the results of this influx in terms of the volume of ILS transactions that have been completed.”

Particularly interesting in the ABS announcement today are its numbers on collateralized reinsurance capacity put to work, which has also reached a new record level in 2014. ABS says that collateralized reinsurance capacity excluding catastrophe bonds reached a record $36.2 billion at 30th June 2014, which is up approximately 23% from the $29.4 billion seen a year earlier.

Perhaps most impressive in terms of the growth of ILS and collateralized reinsurance, ABS puts the amount of collateralized reinsurance capacity at work in 2009 at just $7.7 billion, which means that this segment of the market had grown by a massive 370% in five years.

Schultz said that it is not just the size of the market that is developing, it is also the sophistication of this asset class; “This year, however, has been characterized by more than just largesse, as we have taken positive steps to expand the scope of the ILS offering by structuring innovative deals to address new perils, new territories, and new currencies, as well as making ILS solutions more accessible to smaller firms and those companies wanting to structure smaller transactions.”

Finally, Aon Benfield Securities sees a positive outlook for the ILS and catastrophe bond space and expects deal flow to continue to be attractive. As the most prolific structuring firm and bookrunner of cat bond deals, ABS is particularly well-placed to comment on the future prospects for this sector.

Paul Schultz explained; “Our outlook for the ILS sector for 2015 remains highly positive, and we anticipate that the capital inflows and strong pipeline of opportunities seen in 2014 to continue.”

Not every cat bond transaction included in the figures above from 2014 has completed, in fact there are three still to go which have priced but not yet settled. We include deals in our statistics and charts as they settle and become part of the outstanding market, so expect the charts to change as deals complete over the next week or so.

View the breakdown of the market in our range of charts, allowing you to analyse the cat bond market.

Keep abreast of the make-up of the catastrophe bond and ILS market with the Artemis Catastrophe Bond & ILS Market Dashboard. Designed to be a simple and effective tool which exposes the key data and statistics contained in the transactions found in our catastrophe bond & ILS Deal Directory.