Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Aon Benfield size the ILS market at $14.9 billion, expect $6 billion of issuance in 2012


Reinsurance broker Aon Benfield has published its latest reinsurance market outlook report covering the state of the market at mid-year (our article from earlier today on this report can be found here). The report also includes some commentary on the capital markets side of reinsurance, specifically on the insurance-linked securities and catastrophe bond market. They include a couple of top-line figures which really show the markets growth in the last year and its potential for continuing that growth through the remainder of 2012 and into next year.

As we’ve mentioned a few times in our commentary on various mid-year reports, everyone’s numbers on the size of the ILS and cat bond market tend to differ depending on what transactions they include or don’t include. Aon Benfield tends to include all life, health and longevity ILS as well as all catastrophe bonds, meaning their numbers tend to be very close to those found in our Deal Directory.

Aon Benfield says that the outstanding ILS and cat bond market was made up of $14.9 billion of risk capital outstanding at the end of June 2012. That’s slightly higher than the $14.7 billion from Swiss Re’s report which we wrote about yesterday we believe due to Aon Benfield including one more life ILS deal.

On the growth the market has achieved in the last year, helped by now three quarters of very healthy issuance, Aon Benfield say that on their numbers the amount of risk capital outstanding is up $3.4 billion from the same time at mid-year 2011. That’s very encouraging growth given there have been some maturities through the first half of this year.

The report notes that spreads continue to be observed to be tightening in the secondary cat bond market and so Aon Benfield say that they expect this to produce a more competitive cat bond market in the second half of the year. Aon Benfield predict that issuance for 2012 will hit $6 billion as both seasoned and new investors remain keen to put capital to work. For a company so involved in the ILS and cat bond pipeline to come out with a prediction like that carries a lot of weight as Aon Benfield are privy to dealflow information well in advance of observers such as us. The $6 billion figure seems eminently possible to us as only just over $1 billion of cat bonds has to mature by year-end, meaning that around $3.5 billion of issuance would be required in the second half of the year to meet that target.

You can access Aon Benfield’s mid-year reinsurance market report here and read our article on it from earlier today here.

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