Demand for Catastrophe Bonds Stays Strong

Investor demand for insurance-linked securities (ILS) remained strong in the second quarter of 2014, when 12 catastrophe bonds with a total value of US$4.5bn were closed – the most of any quarter in the entire history of the ILS market, according to Aon Benfield Securities.

‘The Insurance-Linked Securities Second Quarter 2014 Update’
, issued by the investment banking division of global reinsurance intermediary and capital advisor Aon Benfield, reports that when combined with the near-record Q114 catastrophe bond issuance of US$1.4bn, the ILS market witnessed a record first half 2014 issuance of US$5.9bn. That figure was nearly 50% up on the H113 total of US$4.0bn

At the end of June 2014, total catastrophe bonds outstanding remained at a record high, with US$22.4bn of bonds on-risk.

Meanwhile, market pricing conditions for ILS products remained in line with historical lows during Q2 as investor demand kept pace with increased supply, allowing sponsors to expand coverage at competitive rates.

“After a strong 2013, the ILS market has managed to increase its momentum through the first and second quarters of this year, with new records being set for issuance volumes and more catastrophe bonds on-risk than at any other time in the market’s history,” said Paul Schultz, chief executive officer (CEO) of Aon Benfield Securities.

“We believe that there are still further opportunities for expansion, especially if the sector continues to innovate in terms of its product offerings. For instance, our recently launched CATstream facility enables our clients to access capital markets capacity in around half the time than for a traditional catastrophe bond solution.”

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