The report, Alternative Markets Adapt to Competitive Landscape, reveals that annual catastrophe bond issuance reached USD7.0bn – a decrease on the record-breaking prior year (USD9.4bn) yet still the third highest annual issuance in the sector’s history.
Twenty-five transactions – including two life/health transactions – closed during the period, while USD5.9bn of bonds matured.
The 12 months under review saw the setting of several new records in the ILS market:
• A record first quarter issuance of USD1.7bn across eight transactions;
• A record average transaction size of USD279m for any 12-month period ending June 30;
• A record number of catastrophe bonds on-risk (USD23.5bn) for a June 30 period end.
U.S. exposures continued to dominate the catastrophe bond market, with 22 of the 25 transactions comprising U.S. risk in some capacity. Outside of the U.S., dedicated Japan risk was covered in two transactions, and stand-alone Europe risk in one transaction.
Meanwhile, during the 12 months eight quota share sidecar transactions closed – totaling USD955m for the seven sidecars that disclosed their sizes – and the ILW market increased from USD3.5bn to an estimated USD4.0bn.
Paul Schultz, Chief Executive Officer of Aon Securities, said:
“The decrease in catastrophe bond issuance during the 12 months was in part due to the reaction of the traditional and collateralized reinsurance players to the heightened competition from the catastrophe bond market. This reduction was offset by a sizeable increase in collateralized reinsurance participation. We forecast USD6bn to USD7bn in ILS issuance during calendar year 2015, and expect current pricing trends to continue into 2016 in the absence of substantial catastrophic events that disrupt the supply of capital.”
On an annual basis, through June 30, 2015 all Aon ILS Indices posted positive results. The Aon All Bond and BB-rated Bond Indices posted gains of 2.80 percent and 1.29 percent, respectively. The U.S. Hurricane and U.S. Earthquake Bond Indices returned 5.61 percent and 2.60 percent, respectively.
The Aon All Bond Index outperformed relative to comparable fixed income benchmarks, but underperformed the S&P 500 Index during the 12 months under review.
To view the full Insurance-Linked Securities 2015 annual update report, please follow the link below:
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