Catastrophe bond issuance will reach new heights in 2023, with more than $15 billion of full-year issuance forecast by broker Aon, according to senior executive Mike Van Slooten.
Mike Van Slooten, Head of Business Intelligence for Aon’s Reinsurance Solutions division, was speaking today during a briefing held in advance of the 2023 Monte Carlo Rendez-Vous event.
He explained that the catastrophe bond market is one area that can provide some competitive tension at the upcoming January 2024 renewal season.
Discussing where new capital has come from in reinsurance, Van Slooten said, “There has been some incremental capital coming into the industry, we think approximately $10 billion.
“It’s not coming in very visibly on the whole, this capital is not being deployed in new startup companies, which obviously is a very visible form of entry to the market.
“We think half of that $10 billion has come in to support catastrophe bonds, and that is a very active area of the market.”
Van Slooten then went on to provide the official Aon forecast, that, “We think it’s going to be a record year for catastrophe bond issuance, at least $15 billion on our forecasts, and we have a very active pipeline in that space.”
That matches with the forecast our readers made back in July, when 52% of respondents to our poll said they believed property cat bond issuance alone will exceed $15 billion this year.
He said the additional $5 billion is largely from capital raises from the likes of reinsurers Everest Re and RenRe, which he called “a very positive signal of their intent, I think, going forward.”
Going on to say that, “I think the catastrophe bond market in particular is likely to provide some competitive tension in certain markets around the world as we head into the renewals.”
Van Slooten also said that there is evidence of some reinsurers increasing their appetites as well.
“It’s quite clear from the disclosures on the half-year earnings calls, that there are some reinsurers that are showing increased appetites, based on the market conditions as they stand today going into the renewals, which is a bit of a change relative to what we’ve seen in prior years.
“I think at the other end of the spectrum, there are some companies that are still managing volatility as well.
“So this is an environment in which navigating those risk appetites I think is going to, if you do that successfully, that’s how you achieve the best outcome,” Van Slooten explained.
Also read: ILS rebound a key supply-side driver in property cat: Aon’s Monaghan.