Future is bright for ILS: Aon
With an increasing investor appetite for insurance-linked securities (ILS) and increasing sophistication of solutions, 2015 is set to be a good year for ILS.
This is according to Aon Benfield Securities, the investment banking division Aon Benfield, which has launched its latest report on the ILS sector analysing the key trends witnessed in the fourth quarter of 2014.
Aon added that with $5.5 billion of catastrophe bonds maturing in the first half of 2015, it is expected that many existing sponsors will choose to renew their ILS programs, and that new sponsors will continue to be attracted to the sector given the favourable interest spreads and expanding scope of coverage.
Paul Schultz, chief executive officer of Aon Benfield Securities, said: “The strong finish to 2014 resulted in new records being established in the ILS sector, and while a certain amount of sponsor interest can be attributed to the favourable spreads when compared to traditional reinsurance, the greater range of options that have become available across ILS products was also a significant driving force.
“The increased investor appetite for ILS, coupled with the increasing sophistication of solutions, should ensure a positive outlook for the sector in 2015, and we look forward to working with our clients on new and tailored solutions that meet their risk requirements.”
Property catastrophe bond issuance for the period stood at $2.1 billion across six separate transactions, contributing to a record annual property catastrophe bond issuance of $8 billion.
As at December 31, 2014, total catastrophe bonds on-risk stood at $24.3 billion, representing another record for the market and an 18 percent increase over the prior year period.
Notable transactions in the fourth quarter included Everest Re’s Kilimanjaro Re Series 2014-2 which provides the firm with $500m of earthquake coverage for Canada and the US and represents the largest ever five-year term catastrophe bond transaction.
The California Earthquake Authority (CEA) returned to the catastrophe bond market in the fourth quarter, introducing a new program, Ursa Re. The latest transaction for the CEA is the largest yet by $100 million and provides California earthquake indemnity coverage on an annual aggregate basis.