Aon says the insurance linked securities market reached a total volume of $US110 billion ($162 billion) in the year ending June, supported by record-breaking catastrophe bond issuance in three of four quarters.

“The past 12 months can be characterised as a year of records, and the growth of the ILS market comes at a time when risk transfer needs are at their greatest,” Aon CEO of ILS Richard Pennay said. 

“Inflation, evolving weather trends and ambitious moves to close the protection gap have all driven demands for greater insurance and reinsurance capacity.”

The catastrophe bond market increased nearly 18% to reach $US45.6 billion ($67.4 billion) as a record-breaking 64 issuing entities brought $US17.9 billion ($26.4 billion) of bonds across 76 transactions to market. The activity comprised repeat sponsors and new issuers, and structures covering broader geographies and perils.

The period featured the introduction of cyber risk to the sector, with five catastrophe bonds totalling $US575 million ($850 million) brought to market.

Aon says additional capital seeking wider risk margins was met with unprecedented demand for ILS capacity from insurers, reinsurers, corporates and governments, as buyers contended with higher pricing in traditional insurance and reinsurance markets.  

New issuance and strong returns also combined to drive sidecar volume to an estimated record of $US10 billion ($14.8 billion) over the year, up from $US7.1 billion ($10.5 billion) a year earlier and surpassing the previous peak of $US8.4 billion ($12.4 billion) in 2015.

Aon says sidecar growth was facilitated by the return of past ILS investors attracted by heightened returns.