Catastrophe bond issuance made a robust start during the first quarter of 2017 with seven catastrophe bond transactions that totaled US$2.17 billion, according to a report from Aon Securities, the insurance and reinsurance investment banking division of Aon Benfield.

These transactions are just short of the all-time record of US$2.21 billion issued during the same period last year, said the report, titled “Insurance-Linked Securities – Q1 2017 Update.”

While US$2.0 billion of catastrophe bond limit matured during Q1 2017, there was an expansion in the overall market, as new issuance slightly outpaced maturities, the report explained.

Aon Securities expects “brisk issuance” in Q2 2017, although last year’s second quarter had the lowest level of second quarter issuance since 2011.

For the year, the company predicts primary catastrophe bond issuance of US$8 billion.

“With a further US$4.2 billion set to mature in the second quarter, investor capacity remains poised to replace maturing capital with strong demand for new issuances,” Aon Securities said.

The majority of issuance in Q1 2017 came from returning sponsors to the catastrophe bond market, the report said.

Aon Securities noted that downward pressure was seen on interest spreads — a trend that was pronounced for sponsors that issue similar deals year-over year — and sponsors were able to capitalize on strong market demand to increase transaction sizes.

Source: Aon Benfield/Aon Securities