The global insurance-linked securities (ILS) market issued $US6.9 billion ($9.8 billion) of bonds last year, down from $US8.3 billion ($11.8 billion) in 2014, as competition intensified, according to an Aon Securities report.

A record $US1.7 billion ($2.4 billion) was raised in the first quarter, and property catastrophe issues continued to dominate the sector, accounting for $US6.3 billion ($9 billion) of last year’s total issuance.

“The year was marked by a strong initial level of issuance, with a record-setting first quarter, as momentum continued from the all-time high in property catastrophe bond annual issuance set in 2014,” the report says.

“However, issuance was more tepid the rest of the year due to increased competition from traditional and collateralised reinsurers, as well as an industry focus on mergers and acquisitions activity.”

Aon Securities, the investment banking division of Aon Benfield, expects issuance of $US6-$US7 billion ($8.5-$10 billion) this year.

The ILS, or catastrophe bond, market has grown rapidly in the past few years amid increased investor demand for new revenue streams.

“Because overall asset allocation to insurance-linked securities remains relatively low in the global capital markets, the upward potential for the catastrophe bond market still remains high despite year-over-year contraction,” Aon Securities says.

“However, the maturity of the market continues to fuel growth, because many ILS funds are now regularly tracked by the global institutional investor market.”

The second half of last year featured issuance of 10 catastrophe bonds worth $US2.2 billion ($3.1 billion), including a first from China for earthquake coverage.