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Thursday 19 August 2010
Author: Russell Group

The growing interest and issuance in the Insurance Linked Securities (ILS) has seen Aon Benfield launch a series of new indices to track the progress of securities for investors and clients alike.

Aon Benfield Securities, the securities and investment banking operation ofAon Benfield, is to launch the Aon Benfield ILS Indices, which it says will provide a “quantitative view of monthly insurance-linked securities (ILS) returns since December 2000”.

Paul Schultz, President of Aon Benfield Securities, said: "The launch and ongoing administration of the Aon Benfield ILS Indices demonstrate the firm’s continued leadership in the insurance-linked securities market. Additionally, we believe the added data and transparency will lead to new investment in this market and provide greater capital alternatives for our clients.”

Under the firm’s plans the ILS Indices will track the performance of catastrophe bonds in each of four specific portfolios: All Bond, BB-rated Bond, U.S. Hurricane Bond, and U.S. Earthquake Bond. Each index is a total return index representing the return an investor would have achieved by allocating an amount of capital weighted to each catastrophe bond available in the market at a particular point in time. The Indices have been calculated by Thomson Reuters, the leading information provider to the ILS sector.

It comes as the ILA market continues to grow as investors look at areas to maximize their return and firms look for new instruments t mitigate risks such as U.S. wind storm where the available from the traditional markets remains tight.

Aon Benfield said: “Over 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, the global ILS market continues to provide capital value to investors, as demonstrated by the Indices.”

Recent trends highlighted by the development of the indices include; the All Bond Index posted a 12.85 percent return for the 12 months ending June 30, 2010 compared to 2.94 percent the previous 12 months. The BB-rated Bond and Aon Benfield U.S. Hurricane Bond indices produced similar results at 12.95 percent and 15.18 percent returns respectively, while the Aon BenfieldU.S. Earthquake Bond index gained 7.04 percent.