NU Online News Service, April 21, 1:08 p.m.EDT

The return on catastrophe bonds increased 11 percentage pointsover the last twelve months with North America Wind bonds leadingthe pack, according to a report from Aon Benfield Securities.

It found that overall returns on cat bonds increased to 13.02percent for the twelve months ending March 31 from its 2.6 percentreturn last year.

On a three-month basis, the bonds rose close to 3 percentagepoints from 0.95 percent return for last year's first quarter to3.39 percent this year.

Leading the insurance-linked securities sector was North AmericaWind at 14.47 percent return for the twelve months compared to 0.30percent last year. For the three months, the bonds stood at 4.12percent compared to 0.51 percent for the same period last year.

Paul Schultz, president of Aon Benfield Securities, said in astatement, "With issuance low in the first quarter, investorslooked to the secondary market to grow their portfolios and manageinflows. This demand for bonds continued to push prices to levelsunseen in previous years."

He noted, "Toward the end of the quarter, investors gained anoptimistic view of the forward calendar, and the tide shifted to amore balanced market with investors looking to rebalance portfoliosand release capital for new deals. Short-dated bonds exposed toU.S. Wind traded quite actively for this reason."

The securities did not outperform benchmark indexes such as theS&P 500 index during the period, Aon Benfield pointed out, butthe cumulative return for the bonds has exceeded these benchmarkssince January 2008.

Aon Benfield Securities went on to say that the securities"demonstrate a lower level of volatility," which means investors"enjoy greater stability versus general market metrics."

Bonds issued in the quarter amounted to $300 million, well belowpast first-quarter issuance going back to 2006, the broker noted.However, Aon Benfield Securities noted that the first quarter istypically slower than other quarters and that in the past, thefirst quarter is affected by spillover, or bond transactions notcompleted in the prior quarter. This was not the case thisyear.

The recent earthquake and windstorm activity has not causedlosses to any outstanding bonds, the report said, and that has hada minimal effect on market pricing.

Aon Benfield Securities said it anticipates that during 2010there will be $5 billion to $6 billion in new bond issuance.

The report is online at http://tinyurl.com/y2tavsq.

Aon Benfield Securities is the investment banking division ofreinsurance broker Aon Benfield, which is a subsidiary ofChicago-based insurance broker Aon Corp.