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$25B in outstanding cat bonds as of March 31: Aon Benfield


April 21, 2016   by Canadian Underwriter


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Overall investor demand remains high in the insurance-linked securities market, with US$2.215 billion in new issuance of catastrophe bonds – one of which covers Canadian earthquake risk – in the first three months of 2016, Aon plc reported Wednesday.

Chicago-based Aon Benfield – Aon’s reinsurance brokerage unit – released its Insurance Linked Securities Q1 2016 update.

“A total of 14 catastrophe bonds are set to mature in Q2 2016, which is expected to put further downward pressure on bond spreads and increase secondary prices,” Aon Benfield stated. “As overall investor demand remains high, our firm looks forward to a strong second quarter of primary issuance-following the already record Q1 issuance-to match this yet unmet market demand for catastrophe bond risk.”

Aon Benfield released its Insurance Linked Securities Q1 2016 update

Outstanding catastrophe bond issuance was US$25 billion as of March 31, Aon Benfield added.

“U.S. named storm and earthquake dominated the market, as did, to a lesser extent, Japan typhoon,” Aon Benfield said. “Additional placed perils included U.S. severe thunderstorm, winter storm, wildfire, volcanic eruption and meteorite impact; the latter four, typically viewed as add-ons to multi-peril coverage, are gaining prevalence in ILS transactions.”

Aon Benfield included a list of 10 cat bond transacations during the first quareter. Among them was a $300-million issuance, by Atlas IX Capital DAC on behalf of SCOR Global P&C SE. The covered perils of that bond include U.S. hurricane, as well as U.S. and Canadian earthquake.

Another $300-million cat bond transaction was a $300 million issuance by Caelus Re IV Ltd. on behalf of Nationwide Mutual Insurance Company.

That provides Nationwide Mutual with “collateralized reinsurance protection on an indemnity per occurrence basis over a four-year term, for losses arising from named storms, earthquakes, severe thunderstorms, winter storms, wildfires, volcanic eruptions and meteorite impacts in the U.S.,” Aon Benfield said.

U.S. Earthquake (New Madrid) is the peril covered by a $300-million issuance by Merna Re Ltd. on behalf of State Farm.

U.S. Geological Survey has reported that two large earthquakes, five hours apart, were felt December 16, 1811, centred about 200 kilometres south of St. Louis new New Madrid, Mo. Two additional tremors, estimated at more than Magnitude 7, occurred Jan. 23 and Feb. 7, 1812.

In a separate report, titled Four Earthquakes in 54 Days, Swiss Re reported in July 2015 that – using its own models – insured losses from the main shock and aftershock Dec. 16, 1811 would be US$33 billion if they happened today.