Cat bond issuance in Q2 reaches US$6.38 billion across 20 transactions, easily surpassing Q2 2014 record of US$4.49 billion: Aon Securities

Catastrophe bond issuance during the second quarter of 2017 totalled US$6.38 billion across 20 transactions, a new record for quarterly issuance that easily surpassed the previous record of US$4.49 billion set in Q2 2014, Aon Securities said in a new report.

Aon Securities, the investment banking division of global reinsurance intermediary and capital advisor Aon Benfield, launched the report Insurance-Linked Securities Q2 2017 Update on Friday. The report, which analyzes ILS activity that took place during the second quarter of 2017, noted that when added to the Q1 2017 issuance total of US$2.17 billion, the first half 2017 issuance total of US$8.55 billion represented a “historical high – not only for any first half on record but also any annual period on record.”

The previous record annual issuance was established in 2007 at US$8.38 billion, Aon Securities said in a press release.

As the second quarter closed on June 30, more cat bonds were on-risk than ever before, with US$26.12 billion outstanding in the market.

Related: Record breaking US$6.3 billion of non-life property cat issuance in Q2 sees ILS reach “critical juncture:” Willis Towers Watson Securities

Strong investor demand meant that many bonds issued in Q2 were upsized from initial guidance, with Kilimanjaro II Re upsizing by more than 100% to US$1.25 billion from US$600 million, making it the largest issuance of the quarter, and the third largest catastrophe bond in history. The Kilimanjaro II Re Limited Series 2017-1 and Series 2017-2 transaction was on behalf of Everest Reinsurance Company. The Series 2017-1 notes issued under the new program provide annual aggregate protection against United States, Puerto Rico and Canada-weighted industry insured losses for a four year-term, the report explained, adding that the Series 2017-2 offered the same protection for a five-year term. The covered events are named storm events and earthquake events.

The report also pointed out that six different public entities came to market during the second quarter, with a total of US$2.2 billion of cat bond issuances. The cat bonds covered Florida named storms and severe thunderstorms, earthquake risks and multiple perils.

According to the Washington, DC-based Financial Industry Regulatory Authority’s Trade Reporting and Compliance Engine (TRACE), there were 231 secondary market trades totalling US$236.4 million during Q2 2017 – an increase in trade volume of six per cent compared to Q2 2016, while the dollar volume of reported trades decreased by four per cent from Q2 2016.

“During the second quarter, we saw a large amount of maturing limit being renewed, which contributed to the record-breaking issuance figures,” Paul Schultz, chief executive officer of Aon Securities, said in the release. “However, there was still a significant expansion in the overall market, as a result of new sponsors, favourable pricing, and the ability of alternative capital to provide high levels of market capacity.”