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Strong Q4 performance cements new records in catastrophe bond sector, according to Aon Benfield ILS study

Chicago, January 16, 2015 – Aon Benfield Securities, the investment banking division of global reinsurance intermediary and capital advisor Aon Benfield, today launches its latest report on the insurance-linked securities (ILS) sector, which analyses the key trends witnessed in the fourth quarter of 2014.

The report, Insurance-Linked Securities Fourth Quarter 2014 Update, reveals that property catastrophe bond issuance for the period stood at USD2.1bn across six separate transactions, contributing to a record annual property catastrophe bond issuance of USD8.0bn.

As at December 31, 2014, total catastrophe bonds on-risk stood at USD24.3bn, representing another record for the market and an 18 percent increase over the prior year period.

Notable transactions in the fourth quarter included Everest Re’s Kilimanjaro Re Series 2014-2 Class C notes, which provide the firm with USD500m of earthquake coverage for Canada and the United States, and represents the largest ever five-year term catastrophe bond transaction.

Meanwhile, the California Earthquake Authority (CEA) returned to the catastrophe bond market in the fourth quarter, introducing a new program, Ursa Re Ltd. The latest transaction for the CEA is the largest yet by USD100 million and provides California earthquake indemnity coverage on an annual aggregate basis.

Paul Schultz, Chief Executive Officer of Aon Benfield Securities, said: “The strong finish to 2014 resulted in new records being established in the ILS sector, and while a certain amount of sponsor interest can be attributed to the favorable spreads when compared to traditional reinsurance, the greater range of options that have become available across ILS products was also a significant driving force. The increased investor appetite for ILS, coupled with the increasing sophistication of solutions, should ensure a positive outlook for the sector in 2015, and we look forward to working with our clients on new and tailored solutions that meet their risk requirements.”

The report reveals that for the 12-month period to December 31, 2014, all Aon Benfield ILS Indices posted gains.  The Aon Benfield All Bond and BB-rated Bond indices posted returns of 4.39 percent and 2.02 percent respectively, while the U.S. Hurricane and U.S. Earthquake Bond Indices returned 7.37 percent and 3.46 percent respectively.

Aon Benfield Securities forecasts another active year for the ILS market in 2015, fueled by continued growth in alternative capital, and cedants’ increasing comfort with the utilization of ILS in their risk transfer programs.

With USD5.5bn of catastrophe bonds maturing in the first half of 2015, it is expected that many existing sponsors will choose to renew their ILS programs, and that new sponsors will continue to be attracted to the sector given the favorable interest spreads and expanding scope of coverage.

To view the full Insurance-Linked Securities Fourth Quarter 2014 Update, please follow the link below:
http://bit.ly/1CqVUCJ


--ENDS--

For further information: Andrew Wragg andrew.wragg@aonbenfield.com t: 0207 522 8183
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