Funds raised through insurance-linked securities (ILS) rose by 35% in 2012 as investors poured capital into a market that offered diversity and attractive returns.

Aon Benfield, it its fourth-quarter ILS update, says $US6.25 billion ($5.98 billion) of new catastrophe bonds closed, the highest level since 2007, with $US16.54 billion ($15.8 billion) of bonds outstanding at year end.

Several offers were increased because of investor demand and although new issues were driven by US risk, funds were also raised for Mexico’s natural disaster fund, Canadian earthquake and European windstorm.

Aon’s US hurricane bond index returned 10.5% for the year.

Bond prices dropped when Superstorm Sandy hit, although Aon Benfield says no bonds were impaired because of the storm.