At a time when challenges abounded for investors, especially in the capital markets, new research from Aon Benfield Securities today indicates that insurance-linked securities (ILS) remained strong, and provided solid value to sponsors and investors.

The investment banking division of reinsurance intermediary and capital adviser, Aon Benfield, today released its annual review of the ILS market, “ILS Review 2010 – Market Momentum.” The report says that during the past year, both ILS issuers and investors have adapted to a new capital markets landscape, which is evidenced by the evolution of the asset class. Despite continued uncertainty and volatility in the global capital markets generally, Aon Benfield goes on to note that the ILS market continues to perform strongly, with returns increasing significantly from the year prior. 

The study also reveals that market activity remained high during the year ending June 30, 2010, with 20 new transactions totaling $4.6 billion brought to market, compared to just $1.7 billion across 11 transactions during the 12 months ending June 30, 2009.

Additionally, Aon Benfield’s ILS Indices, the firm’s ILS benchmarking tool, launched earlier this month. It found that ILS products provided a total investment return of 12.85% for the year ending June 30, 2010–up from 2.94% the previous year. These results are primarily attributable to mark-to-market gains across all perils, the company says.

“Over the past year, the insurance-linked securities market has once again demonstrated its importance as a source of risk transfer capacity,” says Paul Schultz, president of Aon Benfield Securities. “The market has grown and evolved in response to a changing global economic environment, maintaining its relevance to both sponsors and investors.  Our analysis elaborates on these market characteristics and offers a positive outlook for the future.

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