Insurance-Linked Securities Report 2008 - Aon

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Aon Capital Markets Review of the
Catastrophe Bond Market
Issuance down from 2007 record, but remains strong
During the 12-month period ending June 30, catastrophe bonds solidified their place
as an important risk management tool, with strong issuance through June 30, 2008
following record results in 2007.
Lower reinsurance capacity, late declinations of coverage and high marginal costs
heading into the 2007 North American hurricane season prompted more insurers
and reinsurers to sponsor cat bonds. While still strong, issuance volume in the first
half of 2008 lagged the results for the same period in 2007, a result that is not
surprising given the absence of large-scale catastrophes in 2006 and 2007.
The majority of new insurance-linked securities (ILS) issuance continues to close
before the start of the North American hurricane season and in conjunction with
the traditional reinsurance market’s June 1 renewal schedule. The mid-year pause
in bond issuance suggests that June 30 is a natural conclusion to the cat bond year
for statistical purposes.
Strong 2008 Showing
CATASTROPHE BOND ISSUANCE BY YEAR (Years ending June 30)
8000
7000
6000
5000
4000
3000
2000
1000
0
1,558
1,071 985 986 1,137
2001
2002
2003
2004
2005
3,124
2006
7,003
2007
5,815
2008
Aon Capital Markets
CAT Bonds
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