New catastrophe bond issuance hit a record during the first quarter this year amid signs that the market may be poised for continued growth.

Data compiled by New York-based GC Securities, an affiliate of Guy Carpenter & Co. L.L.C., showed the first three months of 2012 to be the cat bond market's most active first quarter since it began tracking the data. There were eight new transactions totaling $1.34 billion in risk capital, topping the previous first-quarter high of $1.02 billion last year.

Meanwhile, investor demand for catastrophe bonds continues to grow.

“The most significant development is right after we put this out, two deals came out—another $1 billion or so,” said Chi Hum, global head of insurance-linked securities distribution at GC Securities. Two more potentially big deals in the market are likely to close before the start of Atlantic hurricane season, he said.

“So we can end up with a decent year this year for new issuance,” Mr. Hum said.

“The story is there's a lot of cash in the market,” he said. Since 2008, he said, big institutional investors have seen “that this is a diversifying asset and they're starting to target it.”

On the issuer side, “Increasingly the users of reinsurance capacity are looking at cat bonds and valuing the different attributes of cat bonds,” Mr. Hum said. Among characteristics issuers are finding attractive are that cat bonds are fully collateralized and that multiyear cat bond programs can stabilize risk transfer pricing.

Also, cat bond components in issuers' risk transfer programs can provide leverage in seeking better pricing from reinsurers, Mr. Hum said.

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“I think it's been a very good year” thus far, said Morton N. Lane, president of Wilmette, Ill.-based Lane Financial L.L.C. “It's frankly been very hard to keep up with all the issuance and I think that will continue through the year.”

Mr. Lane cited a hardening traditional market and pension fund investments moving into the cat bond market after the 2008 financial crisis as “a happy convergence” driving catastrophe bond market activity.

Christopher McGhee, founder and CEO of McGhee Risk Capital L.L.C. in Santa Monica, Calif., said he wasn't surprised that the cat bond market is “ramping up.”

“Investors continue to like assets that have low correlation with their other assets,” Mr. McGhee said. “In the fixed income sector, these are relatively high-yielding assets.”

“Then you have the phenomenon that prices in (the property catastrophe market) are going up generally,” he said. “That makes it more attractive to investors, but it also makes it more attractive to potential sponsors of cat bonds.”

Among exposures addressed in this year's first-quarter cat bond issues were California earthquakes, U.S. hurricanes, U.S. tornadoes, European windstorms and Japanese earthquakes.

A key development during the first quarter was an issue that essentially served as a renewal of last year's $300 million Muteki Ltd. transaction, which suffered a complete loss as a result of Japan's March 2011 Tohoku earthquake. The deal provided earthquake coverage to Zenkyoren Ltd., the Japanese National Mutual Insurance Federation of Agricultural Cooperatives.

In January, Zenkyoren came to market with another $300 million cat bond deal. Kibou Ltd. included “a little refinement in the triggers,” Mr. Hum said, but it was very similar to the Muteki transaction and sold at a price increase of only 20% above the deal done before the Tohoku earthquake.

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Mr. Hum said the Kibou transaction underscores what he sees as a positive development for the cat bond market: Cat bond pricing is decoupling from reinsurance market pricing. A major factor in that decoupling is the fact that catastrophe bond investors—for whom cat bonds are seen as a portfolio diversifying investment—are looking at a completely different set of pricing drivers than are reinsurers with portfolios full of global catastrophe risks.

“That's a good development and that's one that we've been counting on,” he said, because they thought it would be a positive development in driving the market if cat bond pricing could be viewed independently.

Mr. Hum noted that the approximately $12 billion in risk capital outstanding in the cat bond market represents “probably about 5% of total global property cat reinsurance.” He said he expects that percentage to continue growing.

“It's a trend that I would expect to continue,” said Mr. McGhee. “The main thing is, in the last few years, there continue to be new issuers coming in.”

Mr. Hum was reluctant to predict whether the cat bond market's strong first quarter might set the stage for a record year. “You never know who's going to cross the finish line,” he said. “But going into the U.S. hurricane season, the numbers seem pretty strong. It will depend how many Europeans come in on the back end.”

“The key is there's a lot of money out there looking for a home,” Mr. Hum said.