The report reveals that during 2017, 35 catastrophe bonds were issued by 31 different sponsors, representing a combined total capacity of USD10.7 billion and a new record in the ILS marketplace.
The previous annual issuance record of USD8.38 billion, established in 2007, had already been surpassed by the end of June, following a Q1 issuance of USD2.2 billion and a Q2 issuance of USD6.4 billion. This first half total of USD8.6 billion was then augmented with a Q3 issuance of USD0.8 billion and a Q4 issuance of USD1.3 billion.
As at December 31, 2017, the capacity of all catastrophe bonds active in the market, also known as catastrophe bonds ‘on-risk’, totaled USD25.7 billion – another new record – while alternative capital had reached a record USD89 billion.
While a series of catastrophe events in the second half of the year impacted the pricing on certain catastrophe bonds, the market overcame this challenge in the approach to year-end with new capital entering the sector.
For 2018, the ILS market is expected to maintain much of the momentum it generated during 2017, with existing sponsors expected to renew maturing capacity and new sponsors and investors entering the sector.
Aon Securities forecasts catastrophe bond issuance for 2018 will be approximately USD8-9 billion.
Paul Schultz, Chief Executive Officer of Aon Securities, said: “The ILS market had a very strong 2017, with several new records being set and alternative capital rising to new heights in the reinsurance marketplace. We expect to see a gradual broadening of the scope of ILS products, making them an even more common risk transfer tool for re/insurers, with continued support from investors for this diversifying asset class.”
For the annual period ended December 31, 2017, Aon All Bond and U.S. Hurricane indices produced gains of 1.40 percent and 3.43 percent respectively.
The Aon All Bond Index underperformed relative to comparable fixed income benchmarks, but was higher than the return on the 3-5 year U.S. Treasury Note index.
Insurance-Linked Securities Year-End 2017 Update report
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