Cat bond market smashes records: Aon Benfield

The insurance-linked securities (ILS) market has seen records smashed as cedants secured $4.5 billion of catastrophe bond coverage in the second quarter of 2014.

Aon Benfield Securities reported that 12 catastrophe bonds closed during the period with a total value of $4.5 billion, the most of any quarter in the entire history of the ILS market.

The first half of the year was also a record. When combined with the near-record first quarter catastrophe bond issuance of $1.4 billion, the ILS market witnessed a record first half 2014 issuance of $5.9 billion, exceeding the prior year period by almost 50 percent (1H 2013: $4 billion).

Aon Benfield noted that as of June 30, 2014, total catastrophe bonds outstanding remained at a record high, with $22.4 billion of bonds on-risk.

“Meanwhile, market pricing conditions for ILS products remained in line with historical lows during the second quarter, as investor demand kept pace with increased supply, allowing sponsors to expand coverage at competitive rates,” said the report.

With strong growth continuing in this sector, Aon Benfield Securities forecasts that 2014 could be a record year for the ILS market.

Paul Schultz, chief executive officer of Aon Benfield Securities, said: “After a strong 2013, the ILS market has managed to increase its momentum through the first and second quarters of this year, with new records being set for issuance volumes and more catastrophe bonds on-risk than at any other time in the market’s history.

“We believe that there are still further opportunities for expansion, especially if the sector continues to innovate in terms of its product offerings. For instance, our recently launched CATstream facility enables our clients to access capital markets capacity in around half the time than for a traditional catastrophe bond solution.”