NU Online News Service,Jan. 17, 9:34 a.m. EST

Last year was an active one for insurancelinked securities as placements for 2010 rose 28 percent over theprevious year, according to a report by Aon BenfieldSecurities.

The investment banking and capital advisorysubsidiary of Chicago-based insurance broker Aon Corp. said in its“Insurance Linked Securities, Fourth Quarter Update,2010” report, examining the key trends in the sector during thefourth quarter of last year.

For the year, there were 23 catastrophe bondtransactions totaling $4.8 billion in notional issuance volume. Thenumber exceeds the previous year's 18 deals and issuance volume of$3.4 billion.

The 2010 fourth quarter saw 10 bonds for atotal value of $2 billion, compared to $1.6 billion in the 2009fourth quarter.

Aon Benfield said that while the 2010 firsthalf was characterized by the issuance of bonds covering U.S.hurricane risk, the fourth quarter witnessed a more diverse rangeof securities that also provided sponsors with protection againstEuropean windstorm and Japanese earthquake perils.

According to the report, European windstormcatastrophe bonds were well supported during the year, with sixtransactions totaling €525 million (more than $701 million at thecurrent exchange rate) coming to market.

In a statement, Paul Schultz, president of AonBenfield Securities, said, “The fourth quarter of 2010 putfinishing touches on a year that witnessed a resurgence in ILS[insurance linked securities], and we expect this trend to continueinto 2011. As the broader reinsurance markets continue toexperience price softening, ILS products will remain highlycompetitive this year, offering sponsors a multiyear, fullycollateralized, fixed price risk transfer option that has its owndedicated and experienced investor community.”

Aon Benfield Securities forecasts stronginvestor interest for ILS products in 2011, with several dedicatedILS funds having already stated their increased commitment to thesector.

Meanwhile, the report noted that the Dodd-FrankAct of July 2010 on financial reform has brought additionalcompliance procedures to the catastrophe bond ratings process.However, the law is not expected to impair future ILS marketgrowth, Aon Benfield said.