21 April 2016 Alternative Risk Transfer

Strong start to 2016 bodes well for ILS market: Aon Benfield

A record-breaking first quarter for the insurance-linked securities (ILS) market bodes well for the year to come.

This is according to Aon Securities, the investment banking division Aon Benfield, which has launched its latest report on the ILS sector analysing the key trends witnessed in the first quarter of 2016.

Total catastrophe bond issuance for the period reached $2.22 billion across 10 transactions, representing a new first quarter record for the ILS sector and an increase of more than 30 percent on the previous record set in the first quarter of 2015.

Additional ILS records were set when outstanding catastrophe bonds stood at $25 billion as the quarter came to a close on March 31, 2016.

The bonds mainly covered US named storm and earthquake and to a lesser extend, Japan typhoon.

Aon said that additional placed perils included US severe thunderstorm, winter storm, wildfire, volcanic eruption and meteorite impact and added that “the latter four, typically viewed as add-ons to multi-peril coverage, are gaining prevalence in ILS transactions”.

Secondary markets activity also increased during the quarter, with trade volume rising more than 25 percent compared with the fourth quarter of 2015.

Paul Schultz, chief executive officer of Aon Securities, said: “With market volume typically concentrated around the important reinsurance renewals periods of Q2 and Q4, the strong start to 2016 bodes well for the year ahead, especially in light of the prevailing competitive re/insurance landscape, which contributed to the more moderate issuance volumes of Q4 2015.”

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