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Strong Fourth Quarter Heralds Five-Year High for Insurance-Linked Securities: Aon Benfield ILS Report

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Posted on 18 Jan 2013 by Neilson

AonAon Benfield Securities, the investment banking division of global reinsurance intermediary and capital advisor Aon Benfield, today launches its latest report on the insurance-linked securities (ILS) market, which reviews the key trends witnessed during the fourth quarter of 2012.

The Insurance-Linked Securities Fourth Quarter Update 2012 reveals that new catastrophe bond issuance for the period reached USD1.89bn, and USD6.25bn for 2012 as a whole - a 35 percent increase on the full year 2011 figure and the highest ILS issuance volume since 2007.

A total of seven catastrophe bonds closed during the fourth quarter, including Compass Re 2012 - the largest single transaction of Q4 - which secured USD400m 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, said: '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 forecasts strong ILS issuance volumes throughout 2013, with a solid pipeline for the first half of the year, primarily driven by U.S. risks.


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