Aon Report Highlights Record Growth in Insurance-Linked Securities Sector

Aon plc has released the 18th edition of its insurance-linked securities (ILS) annual report, revealing unprecedented growth in the sector. Catastrophe bond issuance hit a historic high of $17.9 billion across 76 transactions in the 12-month period ending June 30, 2024. This surge pushed the total market size to $45.6 billion, marking an 18 percent increase over the previous year. 

The report attributes the sector's growth to strong demand from insurers, reinsurers, corporates, and governments. These entities sought alternatives as traditional insurance markets experienced higher pricing. A record 64 issuers were responsible for the 76 catastrophe bond transactions, which included not only repeat sponsors but also new entrants. Notably, cyber risk made its debut in the market with $575 million issued in five cyber catastrophe bonds, setting the stage for further diversification. 

The broader ILS market also saw growth, reaching a total volume of $110 billion, driven by the demand for more geographically diverse portfolios and risk types. Investors benefited from the asset class's strong returns, which continued into 2024 following record returns in 2023. 

Richard Pennay, CEO of ILS for Aon, described the period as a "year of records" and highlighted how the ILS market is addressing the growing need for risk transfer in the face of inflation, changing weather patterns, and efforts to close the protection gap. 

In addition, the report reveals that sidecar volumes also reached a new peak of $10 billion, surpassing the previous record of $8.4 billion set in 2015. This growth was fueled by the return of past investors drawn by the heightened returns offered by the ILS market. 

The full Aon Securities 2024 Annual Report is available on the Aon website.