ILS market expands on broader catastrophe risk offerings: Analysis
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The market for insurance-linked securities has grown in size and diversity as it expands beyond its historic concentration on Atlantic hurricane risks, Aon Benfield Securities, the investment banking division of global reinsurance intermediary Aon Benfield, said Friday in an analysis.
The report, “Capital Revolution – ILS Market Expands to New Heights,” notes that catastrophe bonds active in the market as of June 30 of this year totaled $17.5 billion, surpassing the previous half-year record of $16.2 billion at June 30, 2008.
“The willingness of ILS investors to broaden the risks available for securitization has already brought new interest from sponsors in ILS market initiatives,” the report states. “We expect the market will continue to broaden the scope of coverage beyond vanilla natural catastrophe risks, and find innovative ways to utilize the fresh new capital sources.”
The report notes that mutual fund investors now comprise 41% of total investment in ILS, second only to dedicated catastrophe funds at 43%. In 2012, catastrophe funds accounted for 51% of investor capital, while mutual funds accounted for 34%, the report states.
Paul Schultz, Chicago-based CEO of Aon Benfield Securities, noted that the ILS sector has witnessed large capital inflows from both existing and new investors.
“Since the beginning of 2013, an estimated $3 billion in new capital has flowed into the ILS market,” Mr. Schultz said in a statement. “Given the current strong demand for ILS products, we believe that the 2013 calendar year could prove to be an inflexion point for the sector, with momentum for new issuances continuing to build as investors and sponsors seek to leverage the favorable market conditions.”
