Approximately $11 billion of property catastrophe bond limit was placed in 2020, the highest on record, according to a new Aon report that projects the growth momentum will continue in 2021.
While the year was a record for cat bond issuance, results for the 2020 fourth quarter also broke new ground. Q4 issuance reached a record $3.7 billion, Aon said in its report titled “Insurance-Linked Securities — Aon Securities Q4 2020 Update.”
Aon tracked 46 property/casualty transactions in 2020 completed by 36 sponsors, with an average deal size of $234 million. Aon said that the total amount of property cat bonds outstanding is up about 2 percent for the year, from $29.5 billion in 2019.
According to Aon, the “busy pipeline” of cat bond issuance should continue at least through the first two quarters of 2021, with expected bond maturities to come of $2 billion and $4.3 billion, respectively.
Q4 Record, Healthy Secondary Market
For the 2020 fourth quarter, there were 14 cat bond transactions issued, and Aon said investors offered robust support, with 15 of 22 classes upsized from their guidance. As well, four new issuers entered the P/C primary market in Q4.
Aon said that the majority of Q4 transactions involved repeat sponsors, though first-time sponsors contributed to broader market growth.
For the secondary market, there were 63 trades in October, 84 trades in November and 107 in December, Aon said.
Also, $10 billion in this space is expected to mature in 2021, so Aon predicts secondary market trading volume should grow through the year.
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