Demand continues to grow for insurance-linked securities (ILS) as investors are attracted by the returns and make capital available.

Reports by Willis Capital Markets and Aon Benfield have found seven new catastrophe bonds raised $US2.1 billion ($2.04 billion) in the second quarter. The compares with four bonds worth $US600 million ($584.7 million) in the corresponding period last year.

Aon Benfield Securities says demand for ILS continues to outstrip supply, even though total issues for the first half were close to a record at $US3.6 billion ($3.5 billion).

“The pipeline for the remainder of 2012 remains strong, and we are pleased to see healthy levels of capital inflows from both seasoned investors and newer entrants to the ILS sector,” CEO Paul Schultz said.

Aon Benfield is forecasting ILS catastrophe bond issues of $US6 billion ($5.8 billion) this year. The company supplies data used by Thomson Reuters to calculate ILS indices and the four indices for the quarter to June 30 showed returns of between 1.94% and 2.74%.

Willis Capital Markets Head Bill Dubinsky says investor demand is strong and the capital available should encourage further issues.

“In the absence of a significant catastrophe, we would expect the total issuance for this year to be in the $US5.5 billion to $US6 billion range ($5.36 billion to $5.8 billion),” he said.

About 73% of outstanding catastrophe bonds had some exposure to US hurricane risk but Mitsui Sumitomo Insurance raised one for Japanese typhoon risk.