Insurance-Linked Securities Report 2008 - Aon

While transaction volumes have fallen, the market remains strong. The total number
of tranches issued increased in the year ending June 30, 2008, totaling 49 versus 47
in 2007. Interestingly, the number of deals declined in 2008 from 32 to 22, indicating
that transactions are being subdivided to reach more classes of investors and more
investors overall.
CATASTROPHE BOND ISSUANCE BY YEAR AND PERIL (Years ending June 30)
Notional Limit Issued by Peril
8000
7000
6000
5000
4000
3000
2000
1000
0
420 441 301
2001
2002
2003
All told, there has been more than $15 billion in new risk transfer in the last three
years. It is also interesting to note that the $5.8 billion volume in the 12 months
ending June 30, 2008 was nearly double that of the same period ending two years
earlier. The rapid growth in this market over the past two years is a clear indication
that we can expect greater transaction volume than the $1.1 billion issued in 2005,
regardless of the measurement method or date used.
Hurricane North American Quake Euro Wind Japan Quake Asia Paci�c Other
476
2004
Hurricane North American Quake Euro Wind Japan Quake Asia Pacific Other
The market continues to focus on U.S. earthquake and wind risks, yet European
wind and Japanese earthquake transactions maintain a steady presence. Indeed, the
on-risk volumes for European wind and Japanese earthquake in 2008 exceed those
of just a few years ago. It is also encouraging to note the increase in bond issuance
covering other perils in 2008, including tornado, hail, wildfire, and winter storm.
As an aside, market participants periodically debate the relative merits of singleperil
and multi-peril bonds. Comparing 2007 and 2008 to the years immediately
preceding Hurricane Katrina, we find the percentage splits are the same. As such,
the issue of single- or multi-peril has less relevance in 2008 than, for example, the
rise of indemnity structures.
646
2005
1,038
2006
2,328
2007
Aon Capital Markets
1,669
2008
7