Aon: 2023-24 saw ‘record-breaking’ ILS activity

Aon has launched the 18th edition of its Insurance-Linked Securities (ILS) Annual Report, which details a year of what it said was record breaking ILS activity, including the issuance of $17.9 billion of catastrophe bonds across 76 transactions.

In a review of the 12-month period ending June 30, 2024, the Aon Securities report highlights that record catastrophe bond issuance was achieved in three of the four quarters, increasing the total size of the market to $45.6 billion – nearly 18 percent greater than the prior year result. This activity fuelled the growth of the broader ILS market, which reached a total volume of $110 billion.

A record-breaking 64 issuing entities brought 76 catastrophe bond transactions to market over the 12 months, comprising repeat sponsors and new issuers, and structures covering broader geographies and perils. Notably, the introduction of cyber risk to the sector – five cyber catastrophe bonds totalling $575 million were brought to market over the period – set the foundation for further growth in the ILS market. Beyond cyber, investors benefited from more geographically diverse portfolios, and a wider array of risk types, such as commercial and specialty risk.

Additional capital seeking wider risk margins was met with unprecedented demand for ILS capacity from insurers, reinsurers, corporates and governments, as buyers contended with higher pricing across the traditional insurance and reinsurance markets.

The ILS sector has benefited from capital inflows since early 2023, following Hurricane Ian’s landfall in September 2022. Investors continued to benefit from the diversification merits of the asset class and ultimately achieved record returns in 2023, and further strong returns so far in 2024. 

Richard Pennay, chief executive of ILS for Aon, said: “The past 12 months can be characterized 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.” 

The ILS Annual Report also reveals that new issuance and strong returns combined to drive sidecar volume to a new estimated record of $10 billion over the 12 months, compared to $7.1 billion during the prior year period. This record surpassed the previous peak of outstanding volume of $8.4 billion in 2015. Growth of the sidecar market was facilitated by the return of past ILS investors attracted by heightened returns.

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