Insurance-Linked Securities Report 2008 - Aon

Insurance-Linked Securities 2008
18
Long-term Outlook
While there are some initiatives underway to standardize catastrophe risk and
ultimately make it tradeable, the intricacies and unique requirements of catastrophe
risk combined with regulatory statutes will continue to support sponsor demand for
indemnity triggers.
Several recent indemnity sponsors have issued bonds via shelf programs that would
facilitate subsequent new issuance. Use of these programs will fuel the growth on a
year-over-year basis.
Further, many of the recent trends should continue to grow in importance. As
investors gain more experience, insight, and knowledge, they will evaluate each
transaction with greater sophistication. As new sponsors and structures come
to market, investors will continue to rely on existing models for accurate risk
assessment. As these sponsors become more diverse and structures become more
complex, investors will increase their use of multiple models. Finally, as the range
of perils and geographies increase, investors will pay more attention to event and
peril correlations. For sponsors, all of these trends suggest that investor demand
for straightforward transactions with quality underwriting and established thirdparty
modeling will continue to be strong, ultimately leading to an increase in
available capacity.