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Positive cat bond market momentum to continue in 2021: Aon Securities


The property catastrophe bond market experienced a record year in 2020 with around $11 billion of new issuance and leading broker dealer Aon Securities believes the positive momentum will persist.

Aon logoAon Securities, the capital markets and insurance-linked securities (ILS) focused unit of the global insurance and reinsurance broker, said in its latest report that 2020 saw property catastrophe bond issuance rise by 104%, compared to the prior year.

Given this was the year the COVID-19 pandemic broke out and swept the globe, the increase in cat bond market activity is particularly impressive.

46 new property cat bond transactions were counted by Aon Securities in 2020, from 36 sponsors, double the 23 transactions the company counted in the prior year.

By Aon Securities measure, risk capital outstanding in property cat bonds rose by around 2% during 2020, as issuance outpaced maturities and the market neared $30 billion of cat bonds in-force at the end of the year.

Looking forward to 2021, Aon Securities believes positive momentum should persist in the catastrophe bond market.

This aligns with our survey of leading ILS and cat bond broker dealers, who told us that issuance could reach as much as $12 billion, perhaps beating the record set in 2020.

“We believe that the busy pipeline will continue in Q1 and Q2 2021 given the expected maturities of approximately USD2 billion, and USD4.3 billion respectively,” Aon Securities explained.

The company further stated that the high levels of cat bond issuance activity in the final quarter of 2020, when $6 billion of cat bond and related insurance-linked securities issuance was recorded in our latest report, “is a confirmation of the resilience of this market.”

Aon Securities is confident about market prospects for 2021, saying that that the positive momentum in the catastrophe bond market is “also anticipated to continue in 2021.”

Finally, the Aon Securities team also noted that certain trends seen in catastrophe bond structures are expected to persist, as well.

“We still see a preference for cleanly structured deals from high-quality sponsors and investors still seem to favor per occurrence over aggregate triggers as a result of the most recent loss events,” the company explained.

For full details of 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 by month and year.

Download your free copy of Artemis’ Q4 2020 Cat Bond & ILS Market Report here.

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