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Catastrophe Bond Sector Celebrates 25th Anniversary with Record Annual Issuance, According to Aon Data
Cat bonds have proved an instrumental form of capital in many prominent risk events

CHICAGO, Jan. 24, 2022Aon plc (NYSE: AON) today revealed that 2021 catastrophe bond issuance reached a landmark $12.5 billion, with Aon Securities actively participating in the placement of $7.0 billion of the year’s issuance total.  More than $32 billion of bonds are now active in the market. This record annual issuance figure surpasses the previous record of $11.0 billion, set in 2020.

The latest figure coincides with the 25th anniversary of the catastrophe bond sector – a period characterized by steady growth, with over $117 billion of catastrophe bonds issued over the past 25 years. During this time, Aon Securities has regularly led the market in advising clients on the structuring and distribution of catastrophe bonds, and in 2021 captured a marketing leading 54 percent of issuances.  Since the market’s inception in 1997, Aon Securities is the leading investment bank, with a 39 percent share of issuances over the period.

During its history, the market has provided an important source of capital to re/insurers, offering diversification from traditional re/insurance capital and responding to many of the most material catastrophe events, including Hurricane Katrina, the Tohoku earthquake, Hurricane Irma and the more recent COVID-19 pandemic. Throughout these market changing events, Aon Securities has brought 59 different sponsors to market, while innovating for new perils, triggers and structures to meet the dynamic needs of clients and provide solutions that help them to make better business decisions.

Paul Schultz, CEO of Aon Securities, said: “As organizations navigate new forms of volatility, Aon Securities has helped them to rethink access to capital, with catastrophe bonds becoming an integral part of the insurance ecosystem. In addition to growth in scale, catastrophe bonds have evolved to cover a vast array of perils, geographies, triggers and sponsors through some of the most innovative risk transfer structures, and have demonstrated their ability to provide protection for property, casualty, life and health risks. As a testament to its commitment to nurturing and growing the market and ensuring the most efficient capital solutions are available to insurance, reinsurance, corporate and government entities, Aon Securities is proud to have brought new sources of capital to match risks, while continuing to increase its market-leading issuance representation.”

The catastrophe bond sector originated in December 1996 with the launch of the George Town Re Ltd. bond. Since its inception, the sector has evolved to meet numerous capital challenges arising from insurance companies, reinsurance companies, the public sector and large commercial organizations.

Critical government insurance schemes continue to rely on the capital markets to provide diversifying capital to help support their growth and resiliency efforts.

Insurance companies have helped pave the way for the broader insurance market to integrate catastrophe bonds into their capital management strategies, and reinsurers have helped demonstrate the ability for catastrophe bonds to anchor core retrocessional programs.

More recently, sponsorship has expanded to governments, from municipalities to nations seeking to close natural catastrophe protection gaps. Further, global corporate entities across entertainment, real estate, technology and other sectors are sponsoring catastrophe bonds to integrate the value of a new capital pool into their broader executive, risk management and Environmental, Social and Governance (ESG) objectives.

Richard Pennay, CEO of Insurance-Linked Securities for Aon Securities, said: “The expansion of sponsors, the development of structures and the innovation of the sector provides tremendous confidence in the ability for the capital markets to continue to meet the evolving risk management needs of tomorrow, while also helping to address the needs of the underserved.”

Schultz added: “If it weren’t for the vision of insurance, reinsurance, corporate and government sponsors, the commitment of the investment community, and the creativity and guidance of Aon Securities and broker-dealers across the globe, the catastrophe bond market would not be where it is today – and for that, we thank all participants. As the global risk landscape evolves, we are confident that the catastrophe bond sector’s longstanding reputation of innovation, which began 25 years ago, will continue for years to come.”

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