Insurance-linked securities issuance will be strong this year, mainly driven by US risks and underpinned by a solid first half, an Aon Benfield report says.

New catastrophe bond issuance for the first quarter reached $US670 million ($648 million), with a further $US1.12 billion ($1.08 billion) of bonds being marketed, according to Aon Benfield Securities, the reinsurance broker’s investment banking division.

After a slower-than-expected start to the year the catastrophe bond market has picked up, it says.

Strong issuance volumes are expected to continue as the US hurricane season approaches, with about $US4 billion ($3.9 billion) of catastrophe bonds likely to close by June 30.

Three bonds closed in the first quarter, with the largest providing $US270 million ($261 million) for US hurricane and earthquake exposures.

In the year to March 31, investment returns on the Aon Benfield All Bond index were 12.69%, up from 5.90% last year. 

“Risk-adjusted pricing decreases benefitted clients, and visibility of the catastrophe bond market has never been higher,” Aon Benfield Securities CEO Paul Schultz said.

“Momentum gained in the first quarter of [this year] has most certainly carried forward into the second quarter… both in terms of capacity and price.”

Other insurance-linked securities include contingent capital, collateralised reinsurance, industry loss warranties, sidecars and derivative products.