The second quarter saw a "relatively low" catastrophebond issuance at $800 million across five transactions after the record-setting$2.2 billion issuanceacross 10 transactions in the first quarter, according to Aon Securities.
The Aon Benfield investment banking division said in its latestinsurance-linked securities report that the level of risk transferred to capitalmarkets investors has risen steadily since late 2015. The catastrophe bond markethas seen the highest quarterly average risk interest spread in four years duringthe second quarter with a weighted average risk interest spread of 8.40%, correspondingto a weighted average expected loss of 5.05%.
Most of the issuance in the second quarter covered U.S. namedstorm and earthquake risks. Sponsors are increasingly leaning toward aggregate structures,with half of all tranches providing a form of aggregate coverage.
Aon Securities CEO Paul Schultz noted that collateralized reinsurancegrowth continues to surpass catastrophe bond growth.
"Looking ahead, and while the primary market is not typicallyas active during the third quarter, our firm does expect an active second half of2016," Schultz said. "Many investors have capital to deploy which shouldcontinue to lead to further secondary price increases and a relative improvementin attractiveness of the efficiency in the cat bond market."