Catastrophe bond issuance eased to $US800 million ($1.5 billion) in the second quarter after a record $US2.2 billion ($2.9 billion) in the first three months of the year, according to Aon Securities.

Only five new cat bonds were issued during a quarter that is typically active, its report on the insurance-linked securities (ILS) market says.

Aon Securities says the decline can be attributed in part to competition from traditional markets, plus decisions by some sponsors to enter the alternative market earlier in the year.

The secondary market was also less active, according to US Financial Industry Regulatory Authority data. There were 218 trades totalling $US245.23 million ($320.9 million) during the period, with trade volume down more than 32% on the first quarter and the dollar value easing about 20%.

“Looking ahead, and while the primary market is not typically as active during the third quarter, our firm does expect an active second half,” Aon Securities CEO Paul Schultz said.

“Many investors have capital to deploy, which should continue to lead to further secondary price increases and a relative improvement in attractiveness of the efficiency in the cat bond market.”

During the past quarter all Aon ILS indices recorded gains, the report says.

The US Earthquake Bond index posted the greatest growth, with a return of 1.92%, while the All Bond and US Hurricane Bond indices posted returns of 1.67% and 1.66% respectively.