Aon says cat bonds a driver of strong organic reinsurance revenues

Insurance and reinsurance broker Aon has reported its fourth-quarter 2019 earnings and has highlighted strong growth in catastrophe bond and capital market related activities as one of the key drivers of an impressive 17% organic revenue growth within its reinsurance broking unit.

Aon has benefited from the resurgence of the catastrophe bond market at the end of 2019 and will be continuing to do so in 2020, as the capital markets has come alive with much higher levels of issuance as the insurance-linked securities (ILS) market begins to put the last few years of losses behind it.

For the fourth quarter of 2019, Aon has reported that its total revenues grew 4% to $2.9 billion, including organic revenue growth of 7%. For the full-year 2019 total revenues are up 2% to $11 billion, including organic revenue growth of 6%.

Aon cites “strong new business generation globally across the portfolio and improved retention and penetration of existing clients within the renewal book.”

Reinsurance has been a key driver and it’s clear that Aon has likely benefited to a degree from the bringing together of two of its major competitors over the last year.

For Q4 2019, Aon has reported reinsurance segment broking revenues of $187 million, which is a 15% increase from the prior year period and represents impressive organic revenue growth of 17% for the quarter.

Aon said that Q4 saw double-digit growth across every major business segment in reinsurance for the brokerage, including the generation of net new business globally.

Alongside this Aon said that “strong growth in catastrophe bonds within capital markets transactions” have also been a driver of its revenue growth year-on-year.

Of course, the fourth-quarter of 2018 saw catastrophe bond issuance slowed somewhat, as the ILS market was experiencing more pain at the time from recent heavy loss years.

For the full year Aon’s Reinsurance Solutions segment saw revenues rising by 8% to reach $1.686 billion, while organic revenue growth for the year 2019 is reported as being 10%.

The Q4 reinsurance revenues are the highest in at least three years for Aon.

The company tends to report its highest quarterly revenues in Q1 each year and in 2020 that could include a good deal of capital markets revenues as catastrophe bond and collateralised reinsurance activity is currently resurging.

The capital markets business of Aon Securities is a significant contributor to Aon’s overall reinsurance segment results and we’d expect it to be even more so this year if catastrophe bond and ILS issuance continues at the pace the beginning of 2020 has seen.

Aon remains at the top of our  catastrophe bond and ILS banks & brokers leaderboard.