July 26, 2012 / 2:43 PM / 8 years ago

Cat bond issuance narrowly misses H1 record - Aon

* H1 issuance $3.6 bln vs record $3.8 bln in 2007 - Aon

* FY new issuance set to reach $5.5 - $6 billion - Willis

LONDON, July 26 (Reuters) - Catastrophe bond sales fell just short of record levels during the first half of 2012, reflecting strong interest in the securities from capital market investors, according to insurance broker Aon Benfield’s investment banking division.

Insurers and reinsurers issued $3.6 billion of such notes in the six months to June 30, just shy of the $3.8 billion record set in 2007, Aon Benfield Securities said.

“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 insurance-linked securities sector,” said Aon Benfield Securities Chief Executive Paul Schultz.

Catastrophe bonds offer investors an income in return for agreeing to pay some of the issuing insurer’s claims if a hurricane or earthquake strikes.

The securities, which carry higher yields than regular stocks and bonds and are insulated from financial market shocks, are becoming increasingly popular among pension funds and other investors keen to boost returns amid rock-bottom interest rates.

Earlier this month, Swiss Re, the world’s No.2 reinsurer, said it expected the catastrophe bond market to grow this year for the first time since 2007.

The market has contracted in each of the last four years because new issuance has failed to keep pace with the expiry of bonds issued in 2007 and 2006.

Separately, insurance broker Willis said the catastrophe bond market expanded by $700 million in the second quarter of 2012, with new issuance of $2.1 billion partly offset by $1.4 billion of maturities.

New issuance of catastrophe bonds this year is likely to come in at between $5.5 billion to $6 billion, according to estimates from Willis Capital Markets and Advisory unit.

“Reduced risk spreads as a result of strong investor demand and available capital should stimulate increased issuance from sponsors in the future,” said Bill Dubinsky, WMCA’s head of insurance-linked securities.

Reporting by Myles Neligan

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