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Aon Benfield Securities Study: Cat Bond Issuance Surges in Q4 '10, Strong Outlook for 2011

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Posted on 14 Jan 2011

Aon Benfield Securities, the investment banking and capital advisory subsidiary of Aon Corporation, today releases its latest Insurance Linked Securities (ILS) report, which examines the key trends in the ILS sector during the fourth quarter of 2010.
The ILS Fourth Quarter Update highlights the strong performance of property catastrophe bonds during the period, when 10 bonds of total value USD2.0bn were brought to market, compared to the USD1.6bn of transactions seen in Q4 2009.
While the first half of 2010 was characterized by the issuance of bonds covering U.S. Hurricane risk, Q4 gave rise to a more diverse range of securities that also provided sponsors with protection against European Windstorm and Japanese Earthquake perils.
The report reveals that European Windstorm catastrophe bonds were well supported during the year, with six transactions totaling EUR525m coming to market.
In 2010, 23 property catastrophe bond transactions with a notional issuance volume of USD 4.8bn were structured, surpassing the 18 transactions of 2009 worth USD3.4bn.
Paul Schultz, President of Aon Benfield Securities, said: “The fourth quarter of 2010 put finishing touches on a year that witnessed a resurgence in ILS, and we expect this trend to continue into 2011. As the broader reinsurance markets continue to experience price softening, ILS products will remain highly competitive this year, offering sponsors a multi-year, fully collateralized, fixed price risk transfer option that has its own dedicated and experienced investor community.”
Aon Benfield Securities forecasts strong investor interest for ILS products in 2011, with several dedicated ILS funds having already stated their increased commitment to the sector.
Meanwhile, the ILS Fourth Quarter Update highlights that the Dodd-Frank Act of July 2010 has brought additional compliance procedures to the catastrophe bond ratings process. However, the Act is not expected to impair future ILS market growth.
About Aon Benfield Securities

Aon Benfield Securities, Inc. and Aon Benfield Securities Limited (collectively, “Aon Benfield Securities”) provide insurance and reinsurance clients with a full suite of insurance-linked securities products, including catastrophe bonds, contingent capital, collateralized reinsurance, industry loss warranties, sidecars and derivative products. As a recognized leader in this investment banking market, Aon Benfield Securities is helping to redefine capital by offering underwriting and placement of new issues, financial advisory services, as well as securities trading in the secondary market. Aon Benfield Securities’ integration with Aon Benfield Inc’s reinsurance operation expands its capability to provide analytics, modeling, rating agency, and other consultative services.  Aon Benfield Inc., Aon Benfield Securities, Inc. and Aon Benfield Securities Limited are all wholly-owned subsidiaries of Aon Corporation.  Securities advice, products and services are offered solely though Aon Benfield Securities, Inc. and/or Aon Benfield Securities Limited.


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