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Catastrophe bond issuance hit record levels in 2020, more than doubling the issuance in 2019, Aon PLC said in a report Wednesday.
Last year, $11.02 billion in property cat bond limits was placed in the market, compared with $5.38 billion in 2019 and exceeding the $10.16 billion placed in 2017, the previous record year.
The 2020 placement total comprised 46 transactions completed by 36 sponsors with an average deal size of $239 million. That compared with 23 transactions by 21 sponsors with an average size of $234 million in 2019.
Insurers and large policyholders use cat bonds as an alternative or complement to traditional reinsurance programs.
“We still see a preference for cleanly structured deals from high-quality sponsors, and investors still seem to favor per occurrence over aggregate triggers as a result of the most recent loss events,” the Aon report said.
U.S.-based Fitch Ratings Inc. has said that catastrophe bond and insurance-linked securities sector needs a continuous flow of new sponsors to stay dynamic, Artemis reported. A lack of new sponsors along with high volume of scheduled maturities, higher losses, and investor retrenchment in collateralised reinsurance have slowed down the catastrophe bond market in recent years.