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Member, Beacon International Group, Ltd.
Strong investor demand is spurring continued growth in the market for insurance-linked securities, according to a report released Wednesday by Aon Benfield Securities, the investment banking division of global reinsurance intermediary and capital adviser Aon Benfield.
The report, “Insurance-Linked Securities: First Quarter 2013 Update,” notes that, at the end of 2012, the amount of total catastrophe bonds outstanding reached a record of $16.54 billion.
“Despite a slower start to 2013 than expected, the cat bond market picked up around the middle of the first quarter, with several deals in the market at the same time,” the report said. “This provided investors with a variety of risks to choose from, including regional earthquake and hurricane, health as well as U.S. nationwide multiperil.”
Three catastrophe bonds closed during the first quarter of this year, the report notes, with the largest being Caelus Re 2013 Ltd., which provides $270 million of capacity to sponsor Nationwide Mutual Insurance Co. for U.S. hurricane and earthquake exposures.
“Capital flows into the ILS sector materially changed the tone of the market in the first quarter of 2013,” Paul Schultz, CEO of Aon Benfield Securities, said in a statement. “Risk-adjusted pricing decreases benefited clients, and visibility of the catastrophe bond market has never been higher. Momentum gained in the first quarter of 2013 has most certainly carried forward into the second quarter of 2013, both in terms of capacity and price.”
Reinsurers' business model is changing as reinsurer's increasingly look to alternative instruments to transfer risk, Artemis.bm reported, citing a report published by Conning & Co.