Catastrophe bonds hit a $26.82 billion record last year — a new record since the category was launched more than 20 years ago.

The outstanding cat bond market was pushed to the new height by more than $7 billion in new cat bonds and insurance-linked securities issued last year.

A report by website Artemis, which specialises in covering the sector, said that last year’s issuance did not break any records on its own — but had propelled the market to its largest in-force figure.

Greg Wojciechowski, ILS Bermuda chairman and CEO of the Bermuda Stock Exchange, said: “We have a significant number of those listed and they’re not only Bermuda-domiciled vehicles, but international vehicles.

“I certainly think it’s good for Bermuda and all the people who support the growth of the ILS business here in Bermuda because it definitely keeps people employed here.”

He added: “Traditional markets are going to sense the pressure that’s causing and there is a lot of discussion about how ILS will impact insurance — people in the market are looking at ways to become more efficient.”

But he said: “I look at this very positively because it’s a phenomenal story for Bermuda. Bermuda has been in the specialist insurance and reinsurance business for decades, but to change and evolve is important.

“It’s something Bermuda should be very proud of, that it’s in the right position to see this development happening, with the island emerging as a centre of excellence for the creation, support and listing of these vehicles.”

And he pointed out that the value of the alternative capital stream was underlined by the fact that other jurisdictions — including the City of London — were looking to carve out a slice of the market for themselves.

Steve Evans of Artemis said the new record was “a clear sign that cat bonds are here to stay and the ILS market will continue to grow”.

Artemis added that the cat bond and ILS asset class, mostly specialist insurance-linked investment funds which allocate third-party investor capital to back insurance or reinsurance business, continues to gain acceptance and grow, which the website believes has boosted the business to around $80 billion of total reinsurance market capital.

Mr Evans said: “Investments in property catastrophe and other kinds of insurance or reinsurance risk are increasingly seen as an attractive alternative asset class by institutional investors such as pension funds and sovereign wealth managers.

“As the ILS market has matured, this interest has increased and now the sector is finding new ways to access risk to support the growing investor demand.”

Some analysts said that troubles in the reinsurance market, including soft pricing and an excess of capital, suggested the cat bond and ILS market would suffer.

Mr Evans said: “The continued growth of ILS and cat bonds remains a threat to the traditional reinsurance business model, but increasingly insurers and reinsurers are embracing this alternative form of capital both for their risk transfer and underwriting needs.”

It is also predicted that, as technology and new methods of doing business change existing risk transfer models, ILS capital will continue to play a major role.

And new risks like cyber and terror attacks, along with forecasts that climate and weather-related disasters will become more frequent and severe, will demand a broad and diverse risk capital base, which can be filled by the ILS market.