Cat bond market momentum could lead to record year: Aon

Cat bond market momentum could lead to record year: Aon

Favorable momentum in the catastrophe bond market might drive issuance higher and lead to a record year in 2021, according to insurance coverage and reinsurance broker Aon.After a busy first-half of the year for brand-new disaster bonds, the market for insurance-linked securities (ILS) is poised to break records in 2021 it seems, with hunger from investors persisting and interest from ceding companies remaining high.
In its most current reinsurance market report, broker Aon described that strong inflows into the ILS asset class have helped to liquidate a “really strong” first-half of 2021.
As we described yesterday, Aons latest information shows that ILS capital, or alternative reinsurance capital, expanded further and continued its healing back to reach $96 billion by the end of Q1, not far short of its all-time-high or $97 billion (on Aons numbers).
Some of the capital inflows went to catastrophe mutual fund, helping to support the strong issuance pipeline of cat bonds that weve been seeing.
As we discussed previously, the UCITS catastrophe mutual fund sector has actually been growing especially quick lately, with combined properties throughout this segment rising roughly 58% in just one year.
Aon described how first-half cat bond issuance went, stating that, “The market demonstrated strength on strength, integrating near record issuance volume with spread reductions of 10 to 15 percent compared to mid-year 2020. Half issuance this year amounted to USD8.39 billion, just shy of the record set in 2017.”
As development, Aon likewise kept in mind that “this positive capability and pricing environment has actually led to excellent breadth across the ILS market.”
” A varied set of Sponsors, consisting of corporates, insurers, reinsurers and government entities have found value in the ILS market across a broad series of hazards, geographies, trigger types and expected loss levels,” Aon further discussed.
The broker gave a projection for the rest of this year.
Stating, “The positive market momentum, integrated with over USD3.5 billion maturing in the second half of 2021, could result in tape issuance volume for the complete year.”
Paul Schultz, CEO of Aon Securities talked about prospects for the catastrophe bond market for the rest of this year at our recent ILS Asia conference. you can view his keynote speech and the live Q&A held afterwards here.
Access every edition of our quarterly disaster bond and ILS market report here.

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