Catastrophe bonds hits $100bn issuance mark, data reveals

The catastrophe bond sector has passed $100 billion in cumulative issuance since it started more than 20 years ago, according to the latest figures.

Use of insurance-linked securities (ILS) has been growing since the first placement of a $45 million all-peril catastrophe bond in 1996, according to Aon Securities data.

A decade ago alternative capital accounted for $22 billion, with its average rate of growth far exceeding that of traditional reinsurance capital, analysts said. Since 2016, alternative capital has remained at or near record highs, with around $93 billion currently in the re/insurance marketplace of an estimated $610 billion total reinsurance capital. Aon Securities said that the volume of alternative capital is “even more significant when compared to reinsurance capital, since the former is predominantly focused on property catastrophe risk”.

Paul Schultz, CEO of Aon Securities, said: “From its beginnings in 1996, the insurance-linked securities sector has shown remarkable growth, reaching a point today where it is an integral component of the way in which re/insurers approach risk transfer. Having endured significant tests in recent times, the sector has shown strength in adversity, proving that re/insurers and investors view ILS as being an enduring and important part of the industry. Reaching this $100 billion milestone is a fantastic achievement, and we anticipate many further successes for ILS in the years to come as it expands into a greater number of geographies and perils.”

The business highlighted its role as a major underwriter of cat bonds, which has helped to build the sector, saying it had structured and placed more than $34 billion of cumulative new issuances in the ILS market since 2009.

For example, in 2018 Aon’s team reported that it had placed $5.5 billion in catastrophe bond notional across 11 transactions, representing 57 percent of the $9.7 billion total annual issuance. In 2019, the team placed $3.1 billion across eight transactions, representing 56 percent of the total $5.4 billion notional. In total, Aon Securities reported that it has brought 53 sponsors to market, structuring $38.5 billion in catastrophe bonds across 131 offerings – 75 transactions for insurance companies, 46 transactions for reinsurance companies, and 10 transactions for governments and corporate entities.