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Industry Headwinds Fail to Dampen ILS Success, According to Aon Annual Report

CHICAGO, Sep. 6, 2022 - Aon plc (NYSE: AON), a leading global professional services firm, today published its annual report about the insurance-linked securities (ILS) market, which provides comprehensive analyses of trends in the sector during the 12-month period through June 30, 2022.

The report, Alternative Capital: Growing Markets, includes commentary and insights on the catastrophe bond market, transaction activity, ILS-related markets – such as Industry Loss Warranties (ILW), sidecars and direct placements – and growth areas. It highlights that in the last year, there was $12 billion of catastrophe bond issuance, including in the Life, Accident and Health sectors, representing a small decrease of $0.7 billion year-over-year.

The study reveals that ILS capital remained relatively stable at $95 billion through June 30 – a reduction of approximately 2 percent relative to the $97 billion recorded in the prior-year period. The catastrophe bond market, on the other hand, expanded over the past year. As of June 30, 2022, there was $36 billion of outstanding catastrophe bonds, which was 8 percent greater than the $33 billion as of June 30, 2021.

The period under review witnessed both new and repeat issuers using the catastrophe bond market, along with new geographical coverages and structural innovations.

At $8 billion, H1 2022 catastrophe bond issuance was $0.5 billion less than the record six-month primary issuance figure recorded in the first half of 2021. The momentum of the robust issuance pipeline observed across Q1 and Q2 2022 is expected to continue in the second half of the year and into 2023.

Paul Schultz, chief executive officer of Aon Securities, said: “The ILS market has continued to be supported by new and repeat sponsors, and has provided access to capital in a positive orderly manner. Even when faced with wider headwinds such as the conflict in Ukraine, inflationary pressures and rising interest rates, there was near record issuance during the first half of 2022. We expect this momentum to continue through to the end of the year as ILS further establishes itself as a valued asset class and risk transfer mechanism used by organizations seeking to make better decisions as they deploy capital.”

With approximately $2 billion of catastrophe bonds set to mature before the end of 2022, Aon Securities forecasts that ILS market issuance figures could rival the record calendar year issuance in 2021. The team expects continued orderly market activity and momentum in 2023.

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