Aon Benfield ILS Report Notes $1.89 Billion Issued in Q4; $6.25 Billion in 2012

January 16, 2013

In its latest report on the insurance-linked securities (ILS) market, which reviews the key trends witnessed during the fourth quarter of 2012, Aon Benfield Securities, the investment banking division of global reinsurance intermediary and capital advisor Aon Benfield, notes that “new catastrophe bond issuance for the period reached $1.89 billion, and $6.25 billion for 2012 as a whole – a 35 percent increase on the full year 2011 figure and the highest ILS issuance volume since 2007.”

The report notes that a “total of seven catastrophe bonds closed during the fourth quarter, including Compass Re 2012 – the largest single transaction of Q4 – which secured $400 million of U.S. hurricane and earthquake capacity for the National Union Fire Insurance Company of Pittsburgh, an affiliate of insurer AIG.

“Meanwhile, the majority of Aon Benfield’s ILS Indices posted mark-to-market gains in Q4 2012, with the All Bond index rising to 2.1 percent (2011: 1.7 percent), the BB-rated Bond index decreasing to 1.4 percent (2011: 1.7 percent), the U.S. Hurricane Bond index increasing to 2.2 percent (2011: 1.7 percent), and the U.S. Earthquake Bond index increasing to 1.6 percent (2011: 0.7 percent).

“Full year results for the indices were even more impressive, particularly for the All Bond index, which increased to 9.9 percent (2011: 3.2 percent).”

Paul Schultz, Chief Executive Officer of Aon Benfield Securities, commented: “Fourth quarter 2012 ILS issuance volumes were strong adding to the consistently impressive quarterly performances for the year as a whole. The All Bond index outperformed all the major benchmarks for the fourth quarter, mainly due to coupon returns, in what was a relatively steady pricing environment.”

Aon Benfield Securities also forecasts strong ILS issuance volumes throughout 2013, with a solid pipeline for the first half of the year, primarily driven by U.S. risks.

Source: Aon Benfield

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