Record cat bond issuance fuelled growth of broader ILS market: Aon

Insurance and reinsurance broker Aon has published the 18th edition of its Insurance-Linked Securities (ILS) Annual Report, which highlights a year of exceptional ILS activity, with $17.9 billion in catastrophe bonds issued across 76 transactions.

Covering the 12 months ending June 30, 2024, the Aon Securities report notes that record levels of catastrophe bond issuance were achieved in three of the four quarters, expanding the market’s total size to $45.6 billion.

This is an increase of nearly 18 percent over the previous year. This surge contributed to the overall growth of the ILS market, which reached a total volume of $110 billion, says the broker.

Over the year, a record 64 entities brought 76 catastrophe bonds to market, including both returning sponsors and new issuers.

These bonds spanned a wider range of regions and risks. Notably, the sector introduced cyber risk, with five cyber catastrophe bonds totalling $575 million, setting the stage for further market growth.

Investors also benefited from more geographically diverse portfolios and a broader variety of risks, such as commercial and specialty risks.

Aon finds that rising demand for ILS capacity was fuelled by insurers, reinsurers, corporations, and governments seeking wider risk margins in the face of higher prices in traditional insurance and reinsurance markets.

The ILS sector has attracted steady capital inflows since early 2023, following Hurricane Ian’s landfall in September 2022.

Investors have enjoyed the diversification benefits of this asset class, achieving record returns in 2023 and strong returns continuing into 2024.

Richard Pennay, CEO of ILS for Aon, commented: “The past 12 months can be characterised as a year of records, and the growth of the ILS market comes at a time when risk transfer needs are at their greatest. Inflation, evolving weather trends, and ambitious moves to close the protection gap have all driven demands for greater insurance and reinsurance capacity.

“Aon is supporting its clients in accessing record volumes of ILS capital, helping shape better risk transfer decisions while navigating volatility, building resilience, and pursuing profitable growth opportunities.”

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