Aon Benfield, the world’s premier reinsurance intermediary and capital advisor, today releases its annual review of the Insurance-Linked Securities market. The ILS Review 2009 – Adapting to an Evolving Market reveals that despite an extraordinarily challenging environment, the ILS sector outperformed most asset-backed securities and provided positive returns for investors over the past year.
Aon Benfield’s proprietary Cat Bond Indices benchmarking service shows that ILS products provided a total investment return of 3.89% for the year ending June 30, 2009 – down from 10.12% the previous year – with European bonds posting the strongest performance. These results are primarily attributable to mark-to-market losses across all perils; mark-to-market principal losses were more than offset by interest income.
Paul Schultz, President of Aon Benfield Securities, said: “In the face of extraordinary economic events over the past year, the ILS market has shown its resilience. After volumes stalled in the final quarter of 2008, they rebounded in 2009 and the confidence of both investors and sponsors has been restored. The market has demonstrated its ability to evolve and adapt, and ILS solutions will continue to play an important role in re/insurers’ risk transfer strategies.”
Andrew Appel, Chief Executive Officer of Aon Benfield, added: “As we forecast at the beginning of 2009, there has been a resurgence in ILS as investors and sponsors have come to the market with renewed confidence following a benign issuance period at the end of 2008. Aon Benfield Securities continues to listen to both clients and sponsors to help structure solutions tailored to their individual risk transfer requirements. The ILS market has provided $25bn of capital since its inception, and we believe it has a bright future as an integral part of both the reinsurance marketplace, and in our offering as the world’s largest reinsurance intermediary and capital advisor.”
The ILS Review reveals that investor demand remains high for 2009 vintage cat bonds containing improved collateral structures, with investors bidding over par value for certain bonds in June.
