The amount of alternative capital in the reinsurance industry has reached another new high at the middle of 2024, with capital allocated to alternative and insurance-linked securities (ILS) structures now reaching $110 billion, according to Aon.
The broker noted catastrophe bond market expansion as a key driver, highlighting some of the milestones passed by the cat bond market during the second-quarter of the year.
Aon estimates that total reinsurance capital reached a new record high of $695 billion by the end of Q1 2024.
That’s up almost 4% since the end of last year, with growth coming from the traditional side as well as ILS, it seems.
“Retained earnings, recovering asset values and new inflows to the catastrophe bond market,” were the key drivers, Aon said.
However, Aon Securities, the brokers investment banking arm, estimates that overall ILS capital increased to an all-time high of $110 billion through the second quarter, Aon further explained.
We’ve plotted what that looks like below, using Aon data for prior years as well. The H1 2024 total includes the end of Q1 figure for the traditional market and mid-year for ILS capital.
The growth in the first-half is therefore not as significant as you might have thought, being just 2%, or $2 billion since the $108 billion at year-end 2023.
As the catastrophe bond market has grown by more than that during the first-half of this year, it suggests further outflows, or rationalisation of assets from trapped capital and the like, as the ILS market continues to cycle out of older, impaired positions and structures.
Aon notes that its measure of the outstanding catastrophe bond market has reached $46 billion for the first time, at the mid-year, running a little behind our figure given we include private cat bond deals as well.
Aon also noted this was the first quarter to ever see more than $8 billion of catastrophe bond issuance, as the cat bond market continues to set a record pace.
