Chicago, 04/24/2014 – 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 reviews the key trends witnessed during the first quarter of 2014.
The Insurance-Linked Securities First Quarter 2014 Update reveals that seven catastrophe bonds closed during the period with a total value of USD1.4 billion – significantly higher than the USD0.67 billion brought to market in the first quarter of 2013.
However, despite the 110 percent year-on-year increase in issuance volumes, new issuances did not keep pace with the USD2.4 billion of bonds that matured during Q1 2014.
Market pricing conditions for ILS products remained in line with historical lows during the quarter, as strong demand for catastrophe bonds continued among sponsors and investors. Of note, strong investor interest in Merna Re V reduced the spread to two percent, representing a 20 percent decline compared to the Merna IV issuance in the first quarter of 2013, and the lowest spread for a non-investment grade bond in six years.
At March 31, 2014, the trailing 12-month ILS issuance total stood at USD8.2 billion.
Paul Schultz, Chief Executive Officer of Aon Benfield Securities, said: “The ILS market continued to show strength as the first quarter of 2014 came to a close. New issuance demand was strong, as investors chose to redeploy capital into catastrophe bonds, and new capital continued to flow into ILS strategies. Many transactions increased in issuance size and priced at the lower end of, or below, interest spread guidance.”
The Insurance-Linked Securities First Quarter 2014 Update highlights that, for the first quarter of 2014, each of the Aon Benfield ILS Indices posted an increase: the All Bond and BB-rated Bond indices gained 1.62 percent and 1.24 percent respectively, while the U.S. Hurricane Bond and U.S. Earthquake Bond indices gained 1.28 percent and 0.99 percent respectively.
The ILS indices outperformed all comparable fixed income benchmarks for the quarter; however, only the All Bond index outperformed the S&P 500 equity index during the period.
In the absence of severe catastrophic events, Aon Benfield Securities forecasts that 2014 will be another positive year for the Aon Benfield ILS Indices, as the market broadens the spectrum of available risks and expands coverage to also encompass the lower layers of sponsors’ reinsurance programs.
As at December 31, 2013, total catastrophe bond limit outstanding had reached USD20.3 billion – the highest level in ILS market history.Anchor
To view the full Insurance-Linked Securities First Quarter 2014 Update report, please follow the link below:
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