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Insurance-linked securities projected to grow in 2016


Although catastrophe bond issuance declined to $6.9 billion in 2015 from $8.0 billion in 2014, the sector is still showing promising signs of growth, according to insurance industry reports.

Indeed, Swiss Re Ltd. and Aon Benfield Securities say in reports issued Jan. 22 and Jan. 21, respectively, that 2016 catastrophe bond issuance could reach $7 billion.

Meanwhile, Willis Capital Markets & Advisory, a unit of Willis Towers Watson P.L.C., notes in a report issued Jan. 19 that the 2014 total was bolstered by the largest single catastrophe bond ever issued, the $1.5 billion Everglades Re Ltd. from Citizens Property Insurance Corp., a bond providing coverage for Florida windstorms that was upsized more than once due to strong demand.

The Aon report, “Insurance-Linked Securities Year-End 2015 Update,” also noted that 2015 saw a record level of catastrophe bind maturities at $6.8 billion.

The Swiss Re report, “Insurance Linked Securities Market Update, Volume XXIV, January 2016,” notes that this trend will continue with close to $4 billion of scheduled maturities in the first half of 2016.

Re-focusing on growth, the Willis report, “ILS market Update Willis Capital Markets And Advisory January 2016 ILS Outlook Upbeat Amid a Persistent Soft Market,” notes that total alternative capital in the insurance linked securities sector grew to $70 billion at the end of 2015 from $65 billion at the end of 2014.

Growth in the ILS sector in 2015 could also be seen by an important expansion in covered perils as the first-ever catastrophe bond was launched in China. Panda Re Ltd., a private placement, provides $50 million in earthquake coverage for China Property & Casualty Reinsurance Co. Ltd., according to the Willis report.