Catastrophe bond issuance starting to slow down

Annual catastrophe bond issuance reached $6.98 billion in the 12-month period ending June 30, down from the previous 12-month period’s record-setting $9.40 billion, according to a report issued Thursday by Aon Securities Inc., Aon Benfield Group Ltd.’s investment banking division.

That was still enough to make the most recent 12-month period the third-highest in terms of annual cat bond issuance in the sector’s history, according to “Insurance-Linked Securities: Alternative Markets Adapt to Competitive Landscape.”

Twenty-five transactions closed during the 12-month period, down from 35 in the previous 12-month period, noted Aon Securities. But the report added that the average transaction size increased to $279 million, which was a new record for any 12-month period ending June 30.

According to the report, the drop in catastrophe bond issuance — which included one life and one health bond — was due in part to the reaction of both traditional and collateralized reinsurance players to the heightened competition from the catastrophe bond market.

The report also noted that U.S. exposures continued to dominate the catastrophe bond market, with 22 of the 25 transactions comprising U.S. risk in some capacity.

“We forecast $6 billion to $7 billion in ILS issuance during calendar year 2015, and expect current pricing trends to continue into 2016 in the absence of substantial catastrophic events that disrupt the supply of capital,” Aon Securities CEO Paul Schultz said in a statement accompanying the report.