A record $11.3 billion of catastrophe bonds were issued across 32 transactions over 12 months from June last year, surpassing the previous record issuance by 20 percent, Aon Securities has revealed.
In a new report, Alternative Capital Breaks New Boundaries, Aon found that the amount of alternative capital in the reinsurance and insurance sector stood at $88.8 billion, while catastrophe bond limit on-risk reached $25.8 billion, both hitting record highs.
Over the 12 months under review, the Aon All Bond Index and BB-rated Bond Index achieved returns of 5.58 percent and 4.05 percent, respectively, while the US Hurricane Bond and US Earthquake Bond indices returned 6.42 percent and 3.87 percent, respectively.
The report also found that US exposures continued to dominate the catastrophe bond market, with 28 of the 32 transactions covering US property risk in some way.
European sponsors returned to the market, covering property and auto liability, and two returning sponsors sought coverage for Japanese risks through catastrophe bonds.
According to the report, six separate public sector entities came to the market during Q2 2017, issuing $2.2 billion of catastrophe bonds across a range of regions and covered perils.
Paul Schultz, CEO of Aon Securities, said: “The annual period saw a resurgence in alternative capital, particularly in the first and second quarters of 2017. The uplift was partly due to the renewing of capacity across maturing catastrophe bonds, but was also a result of new sponsors coming to market, strong investor demand and the consequent upsizing of many of the ILS transactions.”
He added: “Aside from insurers and reinsurers, we saw notable interest in catastrophe bonds from public entities seeking to transfer risk.”
