Following on from their recent report which was a positive look at the state of the insurance-linked securities market (which we reported on here) Aon Benfield have released a report which looks forward at the prospects for the reinsurance market in 2011. The report titled ‘Reinsurance Market Outlook – Abundant Capital To Cultivate Growth‘ looks at trends that Aon Benfield expects to develop next year.
In the report Aon reviews some of its findings about the catastrophe bond market. The report says that they expect momentum to continue in the ILS space which will lead to more transactions and ‘deals that are larger in scope’. They say that analysis of the market tell a story of steady recovery for the sector and that some of the rebound seen is thanks to the increased transparency and innovation of collateral structures developed in the last two years which has helped to garner investors interest.
Aon Benfield finish off the section of the report about cat bonds by saying; ‘We expect catastrophe bond issuance to increase and approach the peak levels witnessed in 2007, as the ILS markets continue to provide a substantial contribution to the reinsurance industry.’
We certainly agree with the positive sentiment although one point we think is worth making is that for insurance-linked securities to really explode as a risk transfer tool we are not just going to need larger deals but also deals with structures which enable smaller re/insurers and issuers to access the capital markets.