The catastrophe bond market has powered to a first-quarter record, putting to rest suggestions that investors may step away after last year’s string of natural disasters.

Issuance in the quarter was $US3.58 billion ($4.73 billion) across 10 transactions, a new high for the first three months of the year, according to an insurance-linked securities (ILS) report from Aon.

“Following the potential losses that could have been incurred from [last year’s] series of natural disaster events, investors in this sector could easily have taken a ‘wait-and-see’ approach,” Aon Securities CEO Paul Schultz said.

“However, given the record levels of issuance seen during the first three months of the year, it is clear they are aware of the inherent value of ILS and are comfortable with the associated risks.”

Willis Towers Watson says ILS investors have “fully reloaded” and are ready for the June 1 Florida renewals, rejecting the thesis that investors could “cut and run” amid catastrophe losses and rising interest rates.

“Without a true surprise loss, such as an ice-storm in Miami, end-investors will continue to allocate capacity to ILS,” Head of ILS William Dubinsky said.

Yield increases under government bonds are expected to be neutral or slightly positive for issuance and asset growth.

“Even more importantly, we will continue to see a trend towards true syndication, reducing the power of large leading markets,” Mr Dubinsky said.

“All this will put the reinsurance market’s traditional pricing cycle on life support.”

Willis Tower Watson says $US3.1 billion ($4.1 billion) of underwritten, widely distributed non-life ILS capacity was issued through 12 catastrophe bonds in the first quarter.

That compares with $US1.7 billion ($2.2 billion) through five bonds in the corresponding three months of last year.

The sum sets a first-quarter record and is the third-biggest for any quarter.

Non-life capacity outstanding at the quarter’s end was a record $US26.6 billion ($35.2 billion) and included market-diversifying bond transactions for first-time sponsors Chile, Colombia and Peru, and repeat activity from Japanese companies.

Only 63% of outstanding capacity was exposed to US wind, the lowest in the past decade, Willis Towers Watson says.