Strong catastrophe bond market forecast for 2015

The catastrophe bond market should remain strong in 2015 following a robust 2014 fourth quarter, according to a report released Friday by Aon Benfield Securities.

“As we enter 2015, Aon Benfield Securities expects another strong year in the catastrophe bond market, as funds continue to attract new capital, a large number of existing bonds mature, thereby freeing up investor capital, and sponsors seek to expand their use of (insurance-linked securities) in their reinsurance programs,” said the Aon Benfield Group Ltd. unit in its new report, “Insurance-Linked Securities: Fourth Quarter 2014 Update.”

Fourth-quarter catastrophe bond issuance of $2.1 billion included Everest Re Group Ltd.'s Kilimanjaro Re Ltd. Series 2014-2, which provided Everest Re with $500 million of earthquake coverage in Canada and the United States and is the largest-ever transaction with a term of five years, according to the report.

“Demand from investors for new issuance in the catastrophe bond market remained strong as the year came to a close,” the report said.

Also during the fourth quarter, the California Earthquake Authority returned to the catastrophe bond market with its largest transaction yet, Ursa Re Ltd., providing California $400 million of earthquake indemnity coverage on an annual aggregate basis.

“The increased investor appetite for ILS, coupled with the increasing sophistication of solutions, should ensure a positive outlook for the sector in 2015, and we look forward to working with our clients on new and tailored solutions that meet their risk requirements,” said Paul Schultz, CEO of Aon Benfield Securities, in a statement.