Aon: Insurance-Linked Securities Market Up $2B

Aon Benfield Securities, the investment banking division of reinsurance intermediary and capital advisor Aon Benfield, launches its annual report on the insurance-linked securities market, which reviews the key trends witnessed during the 12 month period to June 30.

In a release dated Sept. 5, the Company said the report, entitled Evolving Strength 2012, reveals that catastrophe bond issuance for the period reached USD6.43 billion an increase of more than USD2 billion over the same period in 2011, and second only to the USD8.15bn issuance seen in 2007.

Highlights from the 12 months under review included a record Q1 issuance of USD1.49 billion, eclipsing the previous record set in Q1 2011 of USD1.02 billion.

A total of 30 transactions including two deals from the life and health sector closed during the period, compared with 24 transactions during the prior year period, with U.S. hurricane risk continuing to dominate the market, accounting for more than 50 percent of natural catastrophe issuance.

The proportion of catastrophe bonds covering U.S. earthquake risk increased slightly from 17 percent for the year ending June 30, 2011, to 20 percent for the same period in 2012. By comparison, Europe windstorm transactions decreased slightly from 21 percent to 17 percent in the same timeframe. Meanwhile, life and health issuance activity contributed USD330 million of issuance.

At June 30, total bonds on risk stood at USD14.92 billion, an increase of USD3.4 billion from June 30, 2011.

Meanwhile, Aon Benfield's ILS Indices posted positive returns during the 12 month period, with the All Bond and BB Rated Bond Indices reaching 7.4 percent and 7.86 percent respectively, compared to 2011 returns of 6.43 percent and 4.72 percent, while U.S Hurricane Bond and U.S. Earthquake Bond Indices posted returns of 7.60 percent and 4.38 percent respectively, for the period ending June 30.

Paul Schultz, Chief Executive Officer of Aon Benfield Securities, said: "In the 12 month period under review, the insurance-linked securities sector clearly demonstrated its resilience following the global financial crisis, reaching its highest levels for both new issuance and outstanding volumes in four years. This strong performance is set to continue through the second half of 2012 and beyond, as conditions are appropriate for both sponsors and investors to utilize ILS as an effective risk transfer mechanism and as an asset class that yields healthy returns when compared to benchmark securities. We consider the ILS sector to be continually evolving, becoming ever more diversified and adaptable to clients' needs."

Aon Benfield Securities and Aon Benfield Securities Limited provide insurance and reinsurance products.

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