Catastrophe bonds integral to insurance ecosystem: Schultz, Aon Securities

Just over twenty-five years since the issuance of what is considered the first true, widely syndicated, catastrophe bond transaction, the structure has cemented its role within the insurance ecosystem, according to Aon Securities CEO Paul Schultz.

Commenting on the record year of 144A catastrophe bond issuance seen in 2021, Schultz of Aon Securities, the investment banking and insurance-linked securities arm of the insurance and reinsurance broker, noted the important role broker-dealers have played in cat bond market development.

Aon Securities counted $12.5 billion of property catastrophe bond issuance in 2021, of which the company actively participated in the placement of $7 billion.

Our break-down of 2021 issuance counted the same $12.5 billion of 144A property cat bonds, plus another $470 million of cat bonds covering other lines of insurance business, and just over $1 billion of private cat bond deals.

Aon Securities puts the outstanding catastrophe bond market at over $32 billion at the end of 2021, which compares to the $35.9 billion we counted including the other line of business cat bonds and private deals.

Finally, on the statistical front, Aon Securities cites $117 billion of catastrophe bonds issued over the past 25 years, since the landmark late 1996 George Town Re Ltd., the first transaction in our Deal Directory.

Including the other lines of business cat bonds and private deals we have that cumulative issuance figure at almost $135 billion of cat bond issuance over the same period.

Commenting on its participation in catastrophe bond market growth, Aon explained, “Aon Securities has regularly led the market in advising clients on the structuring and distribution of catastrophe bonds, and in 2021 captured a marketing leading 54 percent of issuances. Since the market’s inception in 1997, Aon Securities is the leading investment bank, with a 39 percent share of issuances over the period.”

Another statistic that might be helpful, is that we have Aon Securities ranked top of our ILS issuance banks and broker leaderboard, with the largest share of the current outstanding market and an impressive 56 cat bonds and related transactions currently outstanding in which it has participated.

Paul Schultz, CEO of Aon Securities, commented, “As organizations navigate new forms of volatility, Aon Securities has helped them to rethink access to capital, with catastrophe bonds becoming an integral part of the insurance ecosystem.

“In addition to growth in scale, catastrophe bonds have evolved to cover a vast array of perils, geographies, triggers and sponsors through some of the most innovative risk transfer structures, and have demonstrated their ability to provide protection for property, casualty, life and health risks.

“As a testament to its commitment to nurturing and growing the market and ensuring the most efficient capital solutions are available to insurance, reinsurance, corporate and government entities, Aon Securities is proud to have brought new sources of capital to match risks, while continuing to increase its market-leading issuance representation.”

Aon Securities highlights the continuing evolution of coverage options and structures, with catastrophe bonds integral to risk management for insurance and reinsurance companies and increasingly a growing range of public entities, governments and corporations around the world.

Richard Pennay, CEO of Insurance-Linked Securities for Aon Securities, also commented, “The expansion of sponsors, the development of structures and the innovation of the sector provides tremendous confidence in the ability for the capital markets to continue to meet the evolving risk management needs of tomorrow, while also helping to address the needs of the underserved.”

“If it weren’t for the vision of insurance, reinsurance, corporate and government sponsors, the commitment of the investment community, and the creativity and guidance of Aon Securities and broker-dealers across the globe, the catastrophe bond market would not be where it is today – and for that, we thank all participants. As the global risk landscape evolves, we are confident that the catastrophe bond sector’s longstanding reputation of innovation, which began 25 years ago, will continue for years to come,” Schultz closed.

Also read: George Town Re silver jubilee – $135bn of catastrophe bonds tracked.

Access all of our charts on the catastrophe bond and related insurance-linked securities (ILS) market here.