Cat bond pipeline to remain elevated through 2021: Aon Securities


The catastrophe bond market issuance pipeline is expected to remain elevated over the rest of this year, as significant scheduled maturities will free up ILS investor capital to be put back to work, market facilitator Aon Securities has explained.

Aon logoThe capital markets unit of the global insurance and reinsurance brokerage, Aon Securities itself had a strong quarter through the first three months of 2021, acting on roughly 43% of the catastrophe bonds issued during the period, by volume, the company said today.

Aon Securities recorded $2.57 billion of 144A property catastrophe bond issuance in the first-quarter of 2021, which was down on the prior year.

However, the company said that, despite cat bond issuance dropping year-on-year, this still reflects “a confirmation of the resilience of this market.”

Issuance still exceeded maturities, by Aon Securities’ reckoning on the transactions it comments on, and this helped the outstanding catastrophe bond market (again based on the 144A deals Aon covers) grow by roughly $450 million to $31.5 billion by the end of Q1 2021.

The company has a positive outlook on the prospects for catastrophe bonds going forwards, as the capital markets continue to provide a cost-effective reinsurance alternative.

“We believe that the elevated pipeline will continue in Q2 and Q3 2021 given the expected maturities of approximately USD4.4 billion, and USD1.1 billion respectively,” Aon Securities forecasts.

Adding, “with this positive momentum also anticipated to continue for the remainder of 2021.”

Pricing has helped to make catastrophe bond conditions attractive for sponsors and issuers in 2021 and Aon Securities refers to this by saying, “Most transactions priced at their tight ends, to lower of guidance, assisting motivation for new and repeat sponsors to come to market.”

The capital markets unit of the insurance and reinsurance broker also highlighted that as more first time sponsors came to market in the first-quarter of 2021, this “contributed to broader market growth.”

Q1 2021 catastrophe bond and ILS market reportDownload Artemis’ report for full details of first-quarter 2021 cat bond and related ILS issuance, including a breakdown of deal flow by factors such as perils, triggers, expected loss, and pricing, as well as analysis of the issuance trends seen by month and year.

Download your free copy of Artemis’ Q1 2021 Cat Bond & ILS Market Report here.

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