Catastrophe bond momentum maintained amid growing corporate interest, according to Aon ILS study

Demand growth witnessed for parametric solutions among non-insurance entities

Jan 21, 2016, 11:58 ET from Aon plc

CHICAGO, Jan. 21, 2016 /PRNewswire/ -- Aon Securities, the investment banking division of global reinsurance intermediary and capital advisor Aon Benfield, today launches its year-end 2015 update on the insurance-linked securities (ILS) sector.

The report, Insurance-Linked Securities Year-End 2015 Update, reveals that total catastrophe bond issuance for calendar year 2015 reached USD6.9bn (2014: USD8.3bn), a period which included a record first quarter issuance of USD1.7bn. The annual issuance total comprised USD6.3bn of transactions relating to property catastrophe exposures (2014: USD8.0bn).

The second half of 2015 saw the closing of 10 catastrophe bonds totaling USD2.2bn, four of which were based on parametric triggers – a feature which had been scarce in the market in recent years but which are currently proving attractive to non-insurance corporations, a key segment for potential growth in the ILS market.

At year-end, total catastrophe bonds on-risk stood at USD24.4 billion, which represented a new all-time market high, as had been the case at every year-end since 2012.

Maturing catastrophe bonds during 2015 totaled USD6.8 billion – also a market high – which resulted in a net market increase as annual issuance continued to outpace maturities.

Paul Schultz, Chief Executive Officer of Aon Securities, said: "Good momentum was maintained in the ILS sector during 2015 amid an environment of increased competition with traditional insurance and reinsurance solutions. This strong level of activity ensured that at year-end, catastrophe bonds on-risk stood at an all-time high. During the year we were pleased to see the growing acceptance of ILS products by corporations, which are tending to opt for fronted and parametric solutions for their inaugural issuance. These solutions have the advantage of a more rapid loss recovery."

For the annual period ended December 31, 2015, all Aon ILS Indices posted gains.  The Aon All Bond and BB-rated Bond indices posted returns of 3.51 percent and 2.00 percent respectively.  The U.S. Hurricane and U.S. Earthquake Bond indices returned 5.01 percent and 2.85 percent respectively.

For the 2015 year, the Aon ILS Indices all outperformed comparable fixed income benchmarks, as well as the S&P 500 Index.

To view the full Insurance-Linked Securities Year-End 2015 Update report, please follow the link below:      

About Aon Securities
Aon Securities Inc. and Aon Securities Limited (collectively, "Aon Securities") provide clients with investment banking products, including underwriting, placement and secondary market trading of debt, equity and insurance-linked securities, financial advisory and M&A services and management of long-dated complex financial guarantee risks embedded in life insurance and annuity products utilizing PathWise™.  Aon Securities' integration with Aon Benfield's reinsurance operation expands its capability to provide analytics, modeling, rating agency, and other consultative services.  Aon Securities Inc. and Aon Securities Limited are all wholly-owned subsidiaries of Aon plc. Securities advice, products and services are offered solely though Aon Securities Inc. and/or Aon Securities Limited.

In the U.S., investment banking and securities products and services are offered through Aon Securities Inc., a registered broker dealer and a member of FINRA and SIPC. Aon Securities Limited is authorized and regulated in the U.K. by the Financial Conduct Authority.

Further information
For further information please contact the Aon Benfield PR team: Andrew Wragg (+44 207 522 8183 / 07595 217168) David Bogg or Alexandra Lewis

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SOURCE Aon plc