Cat bond interest from potential sponsors rising, parametric momentum increasing: Van Slooten, Aon

There is rising interest in catastrophe bonds from potential sponsors and the parametric risk transfer space is another area seeing growing momentum, according to Mike Van Slooten, Head of Business Intelligence at Aon’s Reinsurance Solutions.

Speaking during a briefing held just in advance of the 2024 Monte Carlo Rendez-Vous event, Van Slooten provided an update on reinsurance capital levels and key areas where it is responding to client needs.

After reiterating Aon’s calls for reinsurance capital providers to be supportive of clients needs and to lean in to risk, Van Slooten singled out catastrophe bonds and parametric risk transfer as two areas where client demand is rising.

“The first is the recent growth in alternative capital, which we estimate has now reached a new high of $110 billion,” Van Slooten said. Adding that, “The bulk of that of that growth has been driven by new inflows to the catastrophe bond market.”

He further explained that, “On the property side, new issuance is exceeding the record level seen in 2023 and we have reason to believe this will continue, given the growing interest from potential sponsors.”

Then highlighted other opportunities in the cat bond market saying, “Government risk transfer transactions are just one area of increasing opportunity.

“We also see the range of coverages expanding with cyber showing significant potential.”

Moving on, Van Slooten said, “The second area I wanted to touch on is the growing momentum in parametric products, especially for heavily nat cat exposed risks.

“In short, we see core demand increasing materially, resulting in both an increased pipeline and more deals being transacted.”

Further stating that, “We also see signs of capital mobilising in support, in the form of new MGA’s and existing reinsurers and insurers forming new teams.

“This is a great example of the market reacting to growing client need for broader access to capital.”