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Outstanding catastrophe bond capacity topped $30 billion for the first time, one milestone of several in a report issued Thursday by Aon Securities Inc., the investment banking division of Aon PLC.
During the 12 months ended June 30, $9.74 billion of catastrophe bonds was issued across 29 transactions, the second-highest total for this period, which included a record first-quarter issuance of $3.6 billion, according to the report, Alternative Capital Fortifies Its Position.
Alternative capital in the reinsurance sector also climbed to a high of $98 billion, according to the report.
“Following record catastrophe bond issuance in 2017, and the losses from hurricanes Harvey, Irma and Maria that year, the insurance-linked securities market has maintained its robust performance and has actually moved to a new level in terms of the number of bonds active in the market,” Paul Schultz, Aon Securities CEO, said in the statement.
Notable issuances during the period under review included the $1.4 billion Pacific Alliance catastrophe bond, IBRD CAR, sponsored by the World Bank, providing parametric, per occurrence earthquake coverage for three years to Chile, Colombia, Peru and Mexico, according to the report, which added that this was the largest earthquake catastrophe bond in history.
The Travelers Indemnity Co. Long Point Re III Ltd. 2018-1 was the largest bond of the second quarter, securing $500 million of indemnity-based coverage through June 2022 from Northeast hurricanes, earthquakes, severe thunderstorms and winter storms.
The Texas Windstorm Insurance Association used the Alamo Re 2018-1 bond to secure $400 million of indemnity-based coverage for Texas hurricanes and severe convective storms through June 2021.
An additional $2.9 billion in limit was secured through the 17 quota share sidecar transactions that came to market, the report said.
“We are pleased to see that the ILS sector continues to mature, and that sponsors and investors have responded to the test of loss events, by not only maintaining but often increasing their support of this asset class,” Mr. Schultz said. “We believe that 2018 will see another strong performance.”
Aon Securities also looked at mergers and acquisition activity, reporting that according to S&P Capital IQ, the global insurance and reinsurance sector saw first-half 2018 deal volume of $30.1 billion across 402 deals, more than double the $12.4 billion across 384 deals for the same period in 2017.
“Market conditions are still favorable for M&A, as long-term organic market trends, bolstered by U.S. tax reform legislation signed in December 2017, drive further consolidation in the insurance and reinsurance industries,” the report said.
Catastrophe bond issuance for 2017 set a yearly record at $10.5 billion, piercing the $10 billion mark for the first time as it increased 88% from 2016’s $4.5 billion, according to a new report from Property Claims Services.