Insurance-linked securities issuance is expected to pick up in 2017 with catastrophe bond issuance set to approach record levels, according to Aon Securities' year-end 2016 update on the ILS sector.
Aon Securities said its preliminary expectations for 2017 primary catastrophe bond issuance is $8 billion, noting that a record amount of cat bonds will mature in the first half of the year with $6.4 billion coming off-risk.
For 2016, total catastrophe bond issuance reached $5.8 billion, down from $6.9 billion in 2015 thanks to competition in the insurance market. Despite a record first-quarter 2016 issuance of $2.2 billion, the remainder of 2016 reported lower issuance volume, particularly in the second quarter, which historically sees higher issuance levels given its concurrence with the start of the North America hurricane season.
During the fourth quarter of 2016, the ILS market saw five catastrophe bond transactions worth $2.4 billion, the report noted.
"Given the positive market response already witnessed in late 2016, we expect investors to reinvest available capital and continue to support large competitive alternative reinsurance transactions," Aon Securities CEO Paul Schultz said.
Aon Securities is the investment banking division of Aon Benfield, a part of Aon Plc.