The insurance-linked securities (ILS) market is booming with more issued in the first quarter of this year than at any other time, an Aon Benfield study shows.

Amid the economic turmoil in Europe, insurance investments are seen as a haven, but the booming insurance-linked securities market is a bad sign for those pushing for premium rises, with excess capital invested in the insurance market a major factor holding back rate increases.

A new report from Aon Benfield reveals that catastrophe bond issuance for the period reached a record level of $US1.49 billion ($1.44 billion), with nine transactions closing as investors deployed additional capital into the insurance market.

Three additional catastrophe bonds worth $US495 million ($479 million) priced in the quarter but did not close until the second quarter.

Most first-quarter issues were US hurricane bonds, with earthquake and European windstorm linked bonds also featuring strongly.

The momentum has continued on from the final quarter of last year, with Aon Benfield Securities – the reinsurance broker’s investment banking division – forecasting $US5-6 billion ($4.8-$5.8 billion) ILS issuance this year.

“We believe the market fundamentals are conducive to further growth in this sector,” Aon Benfield Securities CEO Paul Schultz said.

He says record ILS activity “highlights the importance of ILS as both a risk transfer vehicle and an investment product”.

Aside from catastrophe bonds, other insurance-linked securities include contingent capital, collateralised reinsurance, industry loss warranties, sidecars and derivative products.