Cat bond market momentum to carry into 2023: Aon’s Schultz

Recent high levels of issuance in the catastrophe bond market are expected to continue, with a busy second-half of 2022 forecast and that momentum expected to carry into 2023, according to Aon Securities CEO Paul Schultz.

Speaking with Artemis, Schultz explained that market conditions for catastrophe bonds remain attractive, with cedent interest high and insurance-linked securities (ILS) investment managers focused on the beneficial features of the cat bond structure.

“We continue to see ILS manager preference for cat bond products, potentially at the expense of less liquid collateralized products,” Schultz told us.

“As we move from the very active 1H, we see continued momentum in an orderly market,” he continued.

Schultz went on to suggest that there is a chance 2022 catastrophe bond issuance could break all records, marking a second annual high of issuance.

He said, “We expect elevated issuance for the second half of 2022, driven by both new and repeat issuers, potentially challenging issuance levels set in 2021.”

A trend Schultz doesn’t expect will slow, either, forecasting yet another busy year for catastrophe bonds.

“We expect that momentum to carry forward in 2023,” he explained.

Asked where innovation may come from in the cat bond market at this time, the immediate focus is expected to be on a more traditional type of deal, but with some focus on structural features such as triggers, Schultz expects.

“Innovation in the near term will largely be around property structures and trigger selection,” he told Artemis, “With the medium term focused on expanding offerings beyond property cat.”