31 January 2018
Reporter: Jenna Lomax

Cat bonds reach record $10.7bn issuance in 2017

Catastrophe bonds representing a record combined total capacity of $10.7 billion were issued in 2017, according to Aon Insurance-Linked Securities (ILS) report.

Aon’s ILS year-end 2017 update report revealed that during a historic 2017, 35 cat bonds were issued by 31 different sponsors.

After $8.6 billion of cat bonds were issued in the first half of 2017, a series of catastrophe events influenced the pricing of certain cat bonds.

Issuance dropped to $0.8 billion in Q3 2017, but the market overcame these challenge in the approach to the end of the year with new capital entering the sector and issuance in Q4 was up to $1.3 billion.

As of 31 December 2017, the capacity of cat bonds active in the market totaled $25.7 billion and alternative capital reached $89 million–both were new records.

The report predicts the ILS market will carry much of its momentum into 2018 and forecasts cat bond issuance of between approximately $8 billion and $9 billion for the year.

Aon Securities’ CEO, Paul Schultz, stated: “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.”

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