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Total catastrophe bond issuance reached $6.9 billion

Staff writer |
Aon Securities, the investment banking division of Aon Benfield, launches its year-end 2015 update on the insurance-linked securities (ILS) sector.

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The report, Insurance-Linked Securities Year-End 2015 Update, reveals that total catastrophe bond issuance for calendar year 2015 reached $6.9 billion (2014: $8.3 billion), a period which included a record first quarter issuance of $1.7 billion.

The annual issuance total comprised $6.3 billion of transactions relating to property catastrophe exposures (2014: $8.0 billion).

The second half of 2015 saw the closing of 10 catastrophe bonds totaling $2.2 billion, four of which were based on parametric triggers – a feature which had been scarce in the market in recent years but which are currently proving attractive to non-insurance corporations, a key segment for potential growth in the ILS market.

At year-end, total catastrophe bonds on-risk stood at $24.4 billion, which represented a new all-time market high, as had been the case at every year-end since 2012.

Maturing catastrophe bonds during 2015 totaled $6.8 billion – also a market high – which resulted in a net market increase as annual issuance continued to outpace maturities.

Paul Schultz, Chief Executive Officer of Aon Securities, said: "Good momentum was maintained in the ILS sector during 2015 amid an environment of increased competition with traditional insurance and reinsurance solutions. This strong level of activity ensured that at year-end, catastrophe bonds on-risk stood at an all-time high.

During the year we were pleased to see the growing acceptance of ILS products by corporations, which are tending to opt for fronted and parametric solutions for their inaugural issuance. These solutions have the advantage of a more rapid loss recovery."

For the annual period ended December 31, 2015, all Aon ILS Indices posted gains. The Aon All Bond and BB-rated Bond indices posted returns of 3.51 percent and 2.00 percent respectively. The U.S. Hurricane and U.S. Earthquake Bond indices returned 5.01 percent and 2.85 percent respectively.

For the 2015 year, the Aon ILS Indices all outperformed comparable fixed income benchmarks, as well as the S&P 500 Index.

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