US hurricane risks are behind the boom in insurance-linked securities (ILS), according to a report from Aon Benfield Securities.

The investment banking division of the global reinsurance broker says more than 50% of natural catastrophe-related ILS activity in the year to June 30 involved US hurricane risks.

In its report Evolving Strength 2012, Aon Benfield Securities says the proportion of catastrophe bonds covering US earthquake risk rose from 17% last year to 20%. European windstorm transactions fell from 21% to 17%.

Aon Benfield Securities says 2011/12 was the second-best year on record for insurance-linked securities, with cat bond issuance of $US6.43 billion ($6.31 billion).

The best year was 2006/07, with cat bonds worth $US8.15 billion issued.

In 2011/12, 30 ILS transactions closed, compared with 24 last year. At June 30, total bonds on risk stood at $US14.92 billion ($14.64 billion).

Aon Benfield Securities CEO Paul Schultz says the strong performance is set to continue, “as conditions are appropriate for both sponsors and investors to utilise ILS as an effective risk-transfer mechanism and as an asset class that yields healthy returns when compared with benchmark securities”.