Insurance-linked securities have become “foundational reinsurance capital”, with issuance reaching a record $US144.5 billion ($201.6 billion), Aon says.

The figure for the year to June 30 represents annual growth of about 8.3% over the past five years, according to a report from the global broker.

Catastrophe bond issuance in the year hit $US24.9 billion ($34.74 billion) – 15% above the previous record total of $US21.8 billion ($30.41 billion).

Aon says ILS now spans all property and casualty lines, supported by the continued development of asset-intensive sidecars, which typically include casualty lines or whole-account structures.

“The past 12 months marked an important milestone for the ILS market as it continued to evolve into a source of foundational reinsurance capital for clients globally,” Aon Securities CEO Richard Pennay said.

“As the market expands across additional risks and products, it is providing clients with another source of durable capital while continuing to attract investor interest.”

Aon says investor demand remained strong, supported by the appeal of ILS as a diversifying, non-correlated asset class and the absence of material loss-triggering events.

The broker estimates a $US100 billion ($139.5 billion) loss event could generate about $US5 billion ($6.9 billion) to $US10 billion ($13.95 billion) of full market losses, underscoring the relevance of the catastrophe bond market in large-loss scenarios.

“Looking ahead, Aon Securities expects continued pressure on the catastrophe bond market to absorb higher-risk issuances as clients increasingly seek capital markets capacity across lower layers of their programs and become more adept at positioning catastrophe bonds across the bottom, middle and top of the tower.”