Catastrophe bond activity picked up in the fourth quarter of last year after a quiet northern summer, Willis says in a market update.

About $US2.1 billion ($2.7 billion) of non-life catastrophe bond capacity was issued through five deals, up from $US1.4 billion ($1.9 billion) in the corresponding quarter the previous year.

XL Bermuda returned to the market to secure more than $US1 billion ($1.3 billion) of capacity, with bonds for cover against US named storms and earthquakes, European windstorms and Australian tropical cyclones and earthquakes.

The last bond to cover the Australian risks was QBE’s Venterra Re in 2013, the report says.

Willis says the insurance-linked securities (ILS) market continues to grow in assets under management (AUM) and influence, partly by diversifying product form.

“This growth and diversification adds some complexity and nuance to a market that was originally more limited in scope,” it says.

The baseline outlook is for AUM to grow at a similar pace to last year, according to Willis.

“Nonetheless, leverage will grow more rapidly as investors use fronting and similar techniques to enter insurance and reinsurance. This could mean more capacity and more competition even if AUM grows more modestly.”

AUM grew last year to $US75 billion ($99.3 billion), the report says.