Cat bond issuance highest since 2007, Aon Benfield Securities says

Thirteen catastrophe bonds closed during the second quarter of this year, Aon Benfield Securities reported Wednesday in its latest quarterly report.

With a total value of $3.3 billion, the first half of this year has reached a total issuance of nearly $4 billion, the highest level since 2007, according to the investment banking division of Aon Benfield.

During the second quarter, coverage was offered for regional earthquake and hurricane, Turkey earthquake and Australia cyclone, as well as multi-peril across the United States, the company said.

As of June 30, the total catastrophe bond limit outstanding was $17.5 billion.

Most of the issuance in Q2 included repeat sponsors, although Aon said it expects new sponsors to continue to enter the insurance-linked securities sector.

Market pricing conditions for ILS continued the downward shift from earlier in the year, stabilizing by the end of the second quarter at a level more than 40% lower than the fourth quarter of 2012, Aon Benfield Securities also noted.

“The catastrophe bond market consistently continued to offer more aggressive pricing than the traditional reinsurance market,” the report suggests.

“While we usually observe catastrophe bond issuance declining towards the beginning of the U.S. hurricane season in June, this year the number of bonds being brought to market during the end of the second quarter remained high, in part due to the attractiveness of ILS pricing,” Paul Schultz, its CEO noted.

“In addition to these favorable pricing conditions, sponsors secured capacity for longer risk periods and, in some cases, with broader indemnity coverage.

Looking ahead, the pipeline for new issuance remains strong for the second half of the year, and favorable pricing conditions are expected to persist, encouraging new and existing sponsors to the ILS market.”