Aon Securities launched its annual report on the insurance-linked securities (ILS) sector, which analyses the trends in the 12 months to 30 June 2018, and also provides an overview of related markets and (re)insurance mergers and acquisitions activity.
The report, ‘alternative capital fortifies its position’, reveals that $9.7bn of catastrophe bonds were issued across 29 transactions during the period under review – the second highest issuance figure for the period on record, which comprised a record first quarter 2018 issuance of $3.6bn.
Furthermore, as at 30 June 2018, the amount of alternative capital in the (re)insurance sector stood at a record $98bn, while catastrophe bond limit on-risk had reached $30bn – an increase of $4.2bn from the prior year period, and a new record for the sector.
Transactions during the 12 months included the $1.4bn Pacific Alliance catastrophe bond, sponsored by the World Bank to provide earthquake protection to the nations of Chile, Colombia, Peru and Mexico. The transaction was the largest earthquake catastrophe bond in history, and was notable not only for its size, but for uniting four nations in one disaster relief programme, and for the reinvestment of the bond’s proceeds into sustainable development projects.
In the period under review, the Aon All Bond Index and US Hurricane Bond Index achieved returns of 2.72% and -1.13% respectively, with the Aon All Bond Index outperforming all comparable fixed income benchmarks but underperforming the 12.17% return of the S&P 500 index.
Aon Securities CEO Paul Schultz said, “Following record catastrophe bond issuance in 2017, and the losses from hurricanes Harvey, Irma and Maria that year, the ILS market has maintained its robust performance and has actually moved to a new level in terms of the number of bonds active in the market. We are pleased to see that the ILS sector continues to mature, and that sponsors, and investors have responded to the test of loss events, by not only maintaining, but often increasing their support of this asset class. We believe that 2018 will see another strong performance.”
Meanwhile, during the period under review $2.9bn in limit was secured through the 17 quota share sidecar transactions that came to market, six of which were launched by new sponsors, and 11 were renewing entities.
In the six months ending June 30 2018, global
(re)insurance M&A deal value increased significantly, led by a number of notable transactions, including American International Group acquiring Validus Holdings, Kemper Corporation acquiring Infinity Property and Casualty Corporation, and AXA SA acquiring XL Group.
According to S&P Capital IQ, the global (re)insurance sector announced first half 2018 M&A transactions with total deal volume of $30.1bn across 402 deals, compared to $12.4bn across 384 deals for the same period in 2017 – a total deal value increase of 143% and a deal volume increase of 5%. A