Insurance-linked securities (ILS) issuance reached $US3.97 billion ($4.43 billion) in the first half of this year, its highest level for the period since 2007, according to an Aon Benfield report.

The number of catastrophe bonds brought to market at the end of the June quarter remained high, defying a trend for volumes to drop as the US hurricane season begins.

“The pipeline for new issuance remains strong for the second half of the year and favourable pricing conditions are expected to persist, encouraging new and existing sponsors to the ILS market,” Aon Benfield CEO Paul Schultz said.

Issuance for the year is forecast to be between $US7 billion and $US8 billion ($7.8 billion-$8.9 billion).

Thirteen catastrophe bonds with a total value of $US3.3 billion ($3.7 billion) closed in the second quarter. Coverage offered included regional earthquake and hurricane, Turkey earthquake, Australia cyclone and US nationwide multi-peril.

Market pricing conditions declined from earlier in the year before stabilising at the end of the second quarter, at a level more than 40% below the fourth quarter of last year.

Second-quarter investment returns for the All Bond and BB-rated indices reached 2.2% and 1.33%.

For the trailing 12 months, the Aon Benfield All Bond and BB-rated indices posted returns of 12.14% and 8.16%. The US hurricane and US earthquake bond indices returned 13.19% and 6.89%.