CHICAGO, 23 January, 2017 – Aon Securities, the investment banking division of global reinsurance intermediary and capital advisor Aon Benfield, today launches its year-end 2016 update on the insurance-linked securities (ILS) sector.
The report, Insurance-Linked Securities Year-End 2016 Update, reveals that during the fourth quarter, five catastrophe bond transactions came to market totaling USD2.4 billion, including the largest transaction of the year, Galilei Re Ltd., whose Series 2016-1 and Series 2017-1 issuance secured USD1.3 billion on behalf of XL Bermuda Ltd.
Total catastrophe bond issuance for calendar year 2016 reached USD5.8bn – a decrease from USD6.9bn in 2015 – due to a competitive landscape in the re/insurance market, despite the strong fourth quarter and record first quarter issuance of USD2.2bn. Issuance levels for the full year were never able to recover from the lower levels in the second quarter, which historically witnesses higher issuance levels given its alignment with the start of the North America hurricane season.
Looking ahead to the first half of 2017, a record amount of catastrophe bonds will mature, with USD6.4bn coming off-risk. Also taking into account issuance from repeat, as well as new sponsors, Aon Securities’ preliminary view for 2017 primary catastrophe bond issuance is USD8bn.
Paul Schultz, Chief Executive Officer of Aon Securities, said: “Given the positive market response already witnessed in late 2016, we expect investors to reinvest available capital and continue to support large competitive alternative reinsurance transactions. In the context of the macroeconomic environment, we see investors finding continued value in the alternative ILS asset class given the diversification benefit, and expect continued sector growth regardless of outcomes in either interest rate or equity markets.”
For the annual period ended December 31, 2016, all Aon ILS Indices posted positive results. The Aon All Bond and BB-rated Bond indices posted returns of 7.03 percent (2015: 3.51 percent) and 4.97 percent (2015: 2.00 percent) respectively. The U.S. Hurricane and U.S. Earthquake Bond indices returned 7.05 percent (2015: 5.01 percent) and 4.84 percent (2015: 2.85 percent) respectively.
The Aon All Bond Index outperformed relative to comparable fixed income benchmarks with exception only to the 3-5 year BB U.S. High Yield Index which returned 11.66 percent, and the S&P 500 Index, which returned 9.54 percent during the period under review.
To view the full Insurance-Linked Securities Year-End 2016 Update report, please follow the link below: aon.io/2jQieFQ
About Aon Securities
Aon Securities Inc. and Aon Securities Limited (collectively, “Aon Securities”) provide clients with investment banking products, including underwriting, placement and secondary market trading of debt, equity and insurance-linked securities, financial advisory and M&A services and management of long-dated complex financial guarantee risks embedded in life insurance and annuity products utilizing PathWise™. Aon Securities’ integration with Aon Benfield’s reinsurance operation expands its capability to provide analytics, modeling, rating agency, and other consultative services. Aon Securities Inc. and Aon Securities Limited are all wholly-owned subsidiaries of Aon plc. Securities advice, products and services are offered solely though Aon Securities Inc. and/or Aon Securities Limited.
In the U.S., investment banking and securities products and services are offered through Aon Securities Inc., a registered broker dealer and a member of FINRA and SIPC. Aon Securities Limited is authorized and regulated in the U.K. by the Financial Conduct Authority.
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