Aon Benfield results add to catastrophe bond growth optimism
Catastrophe bond issuance in Q2 2017 reached $6.38bn across 20 transactions at Aon Securities, Aon Benfield's investment banking branch. The figure smashed the firm's Q2 2014 record of $4.49bn. Growing investor demand and a rise in public entities coming to market underpinned the rising demand for issuances, Aon Benfield said. The overall market for catastrophe bond issuance also grew due to favourable pricing, new sponsors and the availability of alternative capital.
Another insurance broker has concluded that insurance-linked securities are reaching record issuance levels.

Aon Securities, Aon Benfield’s investment banking division, determined that catastrophe bond issuance for the 2017 second quarter hit $6.38 billion across 20 transactions, a record for quarterly issuance. According to Aon’s update, the last record was $4.49 billion in the 2014 second quarter.

In July, Willis Towers Watson came to a similar conclusion. Willis Towers Watson’s investment banking business known as Willis Towers Watson Securities found that ILS issuance reached what it said was a record-breaking $6.3 billion in the 2017 second quarter, with property catastrophe bond capacity issued through 36 tranches. Like Aon Benfield, Willis Towers Watson said that the number surpasses the previous record set in the 2014 second quarter, which it also tallied at about $4.5 billion.

Aon Benfield said that the second quarter results, combined with the Q1 2017 issuance of $2.17 billion also broke a record. That $8.55 billion total beat any other previous first half for ILS issuance as well as any previous annual period, it said. Previously, ILS annual issuance hit a record in 2007 at $8.38 billion, Aon Benfield said.

What drove this surge? Aon Benfield said that the second quarter saw a surge in strong investor demand, and also different public entities came to market during the second quarter. Also, the market got much bigger.

“During the second quarter we saw a large amount of maturing limit being renewed, which contributed to the record-breaking issuance figures,” Paul Schultz, CEO of Aon Securities, said in prepared remarks. “However, there was still a significant expansion in the overall market as a result of new sponsors, favorable pricing, and the ability of alternative capital to provide high levels of market capacity.”

Many bonds issued during the second quarter were upsized from initial guidance, Aon Benfield said. That included Kilimanjaro II Re, which upsized to $1.25 billion, a jump of more than 100 percent that made it the quarter’s largest issuance and the third largest catastrophe bond ever.

Also, six different public entities came to market in the second quarter bringing with them $2.2 billion of catastrophe bond issuances, according to Aon Benfield.

Source: Aon Benfield