“Very strong” pick up in cat bond issuance expected: Aon’s Schultz


The catastrophe bond market is forecast to spring back to life later this year, with a “very strong” pick up in issuance expected, according to Aon’s Paul Schultz.

paul-schultz-aon-securitiesSpeaking today in Monte Carlo, the Aon Securities CEO explained that the pipeline of new catastrophe bond issues is strong for his firm.

Following the heavy catastrophe loss years cat bond issuance has persisted, although at a reduced rate.

Now, as the insurance-linked securities (ILS) market and reinsurance more broadly recover from their losses, cat bond issuance is set to make a comeback in larger volumes.

Schultz said that after the recent “interesting couple” of loss years, he believes the ILS market now represents a “more sustainable and durable asset class.”

He said it’s clear that ILS has come through the losses “quite well” and that as a result transparency between ILS managers and their investors has increased.

But overall the value proposition of ILS has been proven out, Schultz told the assembled media today.

Moving on to discuss future prospects for the ILS and catastrophe bond market, Schultz explained that the market is set to rebound after a dip in issuance following catastrophe losses.

He said it was “no surprise” we saw catastrophe bond issuance dip over recent quarters, given the severity of loss activity and challenges faced from loss creep and trapped collateral.

But the future looks bright, Schultz and his firm believe.

“Renewed momentum in cat bond issuance is expected from Q4 onwards and into 2020,” Schultz explained.

He said that Aon’s own pipeline of issuance reflects this market rebound.

He also explained that he expects the broader ILS market will gradually unwind the trapped reinsurance collateral it remains exposed to, realising losses and recovering some of it.

Schultz closed, explaining that he expects the cat bond market will experience a, “Very strong pick up in issuance going forwards.”

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