b'ILS and Convergence MarketsIntroduction In 2020, the convergence market, which includes insurance-linked securities (ILS), sidecars, dedicated funds and collateralized reinsurance vehicles, continued the growth trends of prior years, underscoring its establishment as a key component of the global reinsurance market. The volume of new risk-linked security issuances in 2020 was the largest in the history of the market, eclipsing the record-shattering levels of 2018, notwithstanding the coronavirus pandemic-induced financial market uncertainty and volatility. In addition, 2020 saw the introduction of several innovative new risks as well as the entry of significant new market participants. We review below the markets for catastrophe bonds, sidecars and ILS dedicated funds.Insurance-Linked Securities2020 saw approximately $16.4 billion of new risk-linked securities issuances, compared to $11.1 billion in 2019. This issuance level is the highest ever recorded in the history of the ILS market and more than $2.6 billion above the previous record set in 2018, resulting in approxi-mately $46.4 billion of total aggregate principal amount of risk-linked securities outstanding at year-end, representing year-on-year growth of approximately $5.7 billion. US catastrophe risks (particularly US multi-peril and US earthquake) continue to lead, represent-ing approximately 37.1% of outstanding bonds at year-end. Japan risks (earthquake and typhoon) represented approximately 6.7% of outstanding bonds at year-end and European-only risks represented approximately 0.5% of outstanding bonds at year-end, both showing a continued decline. However, multi-region bonds (typically covering the US and Western Europe, but also Japan and Australia) represented approximately 16.5% of outstanding bonds at year-end, showing an investor appetite for European risks when they are bundled with other regions (thereby improving the pricing). Risks from emerging markets, including Latin America, the Caribbean and the Philippines, represented approximately 2.2% of outstanding risks. Additionally, mortgage insurance risks represented approximately 26.6% of outstanding bonds at year-end, highlighting the continued increase in appetite for mortgage transactions. Sponsoring companies in 2020 included longtime annual participants (such as State Farm, Swiss Re and USAA), primary insurer sponsors (such as Allianz SE, Allstate and American Integrity, Nationwide Mutual and UnipolSai) and new insurance sponsors (such as Bayview Asset Management, Convex Re, Fidelis Insurance and Markel Bermuda). State-sponsored insurance entities were significant participants in the market in 2020, including offerings sponsored by the California Earthquake Authority, FEMA, Florida Citizens, Louisiana Citizens and Texas Windstorm Insurance Association.46GLOBAL INSURANCE INDUSTRY | YEAR IN REVIEW2020'