Insurance risk brought high returns in 2012 -broker Aon Benfield

LONDON Tue Jan 15, 2013 9:55am EST

LONDON Jan 15 (Reuters) - Investing in insurance risk generated higher returns than other financial benchmarks in 2012, with an index of insurance-linked securities yielding almost 10 percent, broker Aon Benfield said in a report on Tuesday.

ILS include catastrophe bonds, which give investors an income in exchange for promising to pay some claims if a natural catastrophe occurs.

Returns on ILS fared well against other financial benchmarks, attracting new investors on the perception the asset class is insulated from mainstream financial and economic shocks.

The Aon Benfield All Bond ILS index showed a 9.9 percent return in 2012, compared to 1.6 percent on 3-5 year Treasury notes. The return on 3-year U.S. corporate notes rated at BB+ was 7.6 percent and on 3-5 year fixed rate asset-backed securities it was 6.4 percent.

Cat bond sales totalled $6.25 billion last year, an increase of more than 35 percent from 2011, Aon Benfield said.

New issuance was at its highest since 2007 and total bonds outstanding at year-end was a record $16.54 billion.

Aon Benfield's U.S. Hurricane Bond index posted returns of 10.5 percent, beating the prior year's 6.1 percent. The U.S. Earthquake Bond index returned 5.0 percent, down from 5.4 percent.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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