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Aon Benfield Securities

Aon Benfield ILS Indices

3/31/2011

12/31/2010

3/31/2010

12/31/2009

2011 2010

2011 2010

All Bond

231.17

235.98

219.96

212.81

2.04%

3.36%

5.10%

14.59%

BB-rated Bond

218.24

225.47

211.05

203.95

3.21%

3.48%

3.41%

14.48%

U.S. Hurricane Bond

231.35

229.29

214.71

207.99

0.89%

3.23%

7.75%

17.16%

U.S. Earthquake Bond

197.73

195.36

185.27

181.48

1.21%

2.09%

6.72%

7.21%

3-5 Year U.S. Treasury Notes

302.45

302.72

289.94

286.22

0.09%

1.30%

4.32%

0.61%

3-Year U.S. Corporate BB+

375.72

370.34

348.93

335.82

1.45%

3.91%

7.68%

22.57%

S&P 500

1325.83

1257.64

1169.43

1115.10

5.42%

4.87%

13.37%

46.57%

ABS 3-5 Year, Fixed Rate

329.35

325.81

305.82

294.68

1.09%

3.78%

7.69%

24.63%

CMBS Fixed Rate 3-5 Year

252.42

247.44

226.29

212.99

2.01%

6.25%

11.54%

31.65%

Aon Benfield ILS Indices

Index Title

Index Value

Benchmarks

Return for Quarterly Period Ended March 31

Return for Annual Period Ended March 31

The Aon Benfield ILS Indices are calculated by Thomson Reuters using month-end price data provided by Aon Benfield Securities. The ILS indices posted mixed results for the first quarter of 2011. Both the Aon Benfield All Bond and BB-rated Bond indices dipped into negative territory, driven down by mark-to-market losses on Japan Earthquake exposed bonds. The All Bond index posted a negative two percent return for the three months ending March 31, 2011 compared to a 3.4 percent return for the same period in 2010, while the BB-rated Bond index posted a negative 3.2 percent return for the most recent three month period versus 3.5 for the same period in 2010.

The U.S. Hurricane Bond and U.S. Earthquake Bond indices remained in positive territory gaining 0.9 percent and

    • 1.2

      percent respectively. The positive performance of the

      • U.

        S. Hurricane Bond index was due to coupon returns

despite slight mark-to-market losses.

We expect that spreads, and therefore prices, will remain relatively stable as we head into U.S. hurricane season. In the absence of any further significant global catastrophes, we expect strong performance from the index for the remainder of the year.

Related Markets Update

January renewals proceeded smoothly within the collateralized reinsurance market. The Darfield New Zealand earthquake in September 2010 proved to have limited impact on covers due to exclusion or limits on contribution to aggregate covers. For similar reasons, other events —Australian flooding at the end of 2010 and into the early days of 2011, Tropical Cyclone Yasi and the February 22, 2011 Christchurch earthquake —are estimated to only marginally impact the sector. However, it remains unclear how the recent earthquake in Japan will aect the collateralized reinsurance market.

In cases where collateral is being held due to the encroachment of losses, collateralized reinsurers may attempt to negotiate a “roll-over” of the same assets into the next year’s collateral accounts. Depending on the level of adverse development risk, cedants may accept this in order to secure renewal capacity. However, if a further event or sequence of events occurs with sucient size to increase cedants’ need to hold collateral against adverse development, there is an increased risk that these negotiations may be more dicult, possibly leading to future capacity constraints in this market.

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