Strong demand for catastrophe bonds puts the asset class well on track to reach its target volume of $6 billion at the end of 2012, Aon Benfield said in a Sept. 5 report.

The second quarter of 2012 concluded the most active first half for five years. Issuance in the sector produced a total of $3.6 billion compared to a 2007 first half issuance of just under $5 billion. In 2011 the first half volume was at $1.7 billion, according to figures recorded by Aon.

Investors looking to deploy funds have led to a strong demand for these bonds, the report said. Both repeat and new sponsors are expected to engage with the market for diversification and to complement overall reinsurance purchases.

Traditional asset managers have become more comfortable and, in the past year, small-to-mid sized funds have increased dramatically. Large funds have also continued their capital raising. The report said that pension consultants have also started to research and support the asset class, which is expected to drive more investment into the sector.  

Willis Capital Markets & Advisory in a July 23 report on the industry said that the shift towards private unlisted vehicles, along with independent catastrophe risk funds, will take an increasing share of the catastrophe risk market in collateralized form over the medium term.

The insurance and reinsurance advisory company said it expected total issuance for this year to be in the $5.5 billion to $6 billion range.




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