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CAT bond market hits series of historical highs - Aon

Source: Asia Insurance Review | Sep 2017

Global Nat CAT

Aon Securities reported that catastrophe bond issuance during 2Q 2017 stood at US$6.38 billion across 20 transactions – a new record for quarterly issuance that easily surpassed the previous record of $4.49 billion set in 2Q 2014. 
 
   These findings came from its latest report, Insurance-Linked Securities Q2 2017 Update, on the insurance-linked securities (ILS) sector, which analyses the ILS activity that took place during the second quarter of 2017.
 
   When added to the 1Q 2017 issuance total of $2.17 billion, the first half 2017 issuance total of $8.55 billion represented a historical high – not only for any first half on record but also any annual period on record. The previous record annual issuance was established in 2007 at $8.38 billion.
 
   As the second quarter closed on 30 June 2017, more catastrophe bonds were on-risk than ever before, with $26.12 billion outstanding in the market.
 
Many bonds were upsized
Strong investor demand meant that many bonds issued in 2Q were upsized from initial guidance, with Kilimanjaro II Re upsizing by more than 100% to $1.25 billion, making it the largest issuance of the quarter, and the third largest catastrophe bond in history.
 
   Of note, six different public entities came to market during the 2Q period, with a total of $2.2 billion of catastrophe bond issuances.
 
   According to FINRA’s Trade Reporting and Compliance Engine (TRACE), there were 231 secondary market trades totalling $236.4 million during 2Q 2017 – an increase in trade volume of 6% compared to 2Q 2016, while the dollar volume of reported trades decreased by 4% from 2Q 2016.
 
   Mr Paul Schultz, CEO of Aon Securities, said: “During the second quarter, we saw a large amount of maturing limit being renewed, which contributed to the record-breaking issuance figures. 
 
   However, there was still a significant expansion in the overall market, as a result of new sponsors, favourable pricing, and the ability of alternative capital to provide high levels of market capacity.” A 
 
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