In its detailed summary of the insurance-linked securities (ILS) market, Aon Benfield Securities documents the surging interest in catastrophe bonds and other alternative risk transfer methods. The aptly titled report, ‘Capital Revolution – ILS Market Expands to New Heights,’ was released on August 30 with in-depth analysis of performance in this space over a 12-month period ending June 30, 2013.
Over the course of 76 pages, the report’s authors provide snapshots of activity in the ILS market, break down cat bond issuances by quarter, compare ILS investor interest to that of traditional markets, and include analysis and outlook. One trend that emerged is the predominance of US investor capital in the ILS market, with a share of 44% remaining nearly unchanged from 2012. Swiss and UK investors increased their participation in 2013, while investors from Bermuda continued to account for a lower portion of overall activity.
Aon Benfield analysts noted a continuing influx of investor capital in the face of reduced yields. Meanwhile, the upsurge in competition has provided cedants with an attractive environment for obtaining added protection against their perils, and the trend is expected to continue until at least the first part of 2014.
A highly publicized storm-surge cat bond, issued to protect New York’s Metropolitan Transportation Authority (MTA), could be indicative of a larger trend in cat bonds and the ILS market more generally. The report suggests that innovation will likely continue to reshape this investment space going forward, as the market expands beyond traditional natural catastrophic events. This should also spur an active second half of the year, which could help 2013 surpass the record-setting 2007 in new issuances.
Posted: Monday, October 7th, 2013