Aon plc today announced the launch of its ILS Annual Report 2020, which analyses the key trends observed in the insurance-linked securities (ILS) sector during the 12-month period to June 30, 2020.
The report, Alternative Capital: Growth Potential and Resilience, reveals that ILS markets achieved record catastrophe bond issuances in Q4 2019 and Q1 2020, displaying resilience in the face of a number of taxing natural hazard events across Asia Pacific, Europe, the U.S., and Australia, as well as the novel coronavirus (COVID-19) global pandemic.
In the period under review, $9 billion of catastrophe bond issuance was secured – an increase of $3.5 billion year on year – while ILS capital decreased from $93 billion to $91 billion. By June 30, 2020, catastrophe bonds on-risk stood at $28.8 billion, 1.5 percent less than June 30, 2019.
New sponsors and repeat issuers came to market during the 12-month period, along with new geographical coverages and innovations in the catastrophe bond market. Following a sector slowdown in April due to COVID-19, the primary market resumed higher levels of activity in May and June, with busy pipeline activity anticipated for Q3 and Q4 2020.
In terms of capital provisions, institutional investors and ILS funds together provided 85 percent of the total capacity for new issuances brought to market by Aon Securities during the period, while reinsurers saw no change in market share following last year’s growth, and Multi-Strategy Funds’ participation decreased.
Meanwhile, the Aon ILS Indices, calculated by Bloomberg using month-end price data provided by Aon Securities, revealed that in a period with very few significant catastrophic losses and slightly increased spreads, the All Bond index was able to post an 8.40 percent return during the 12 months ending June 30, 2020, while the U.S. Hurricane index posted a return of 8.84 percent.