One of the factors shaping the market for insurance-linked securities in 2012 has been an upswing in investor demand for the product.

While a mixture of hedge funds, money managers and banks have traditionally made up a large part of the investor base, recently dedicated investment funds such as Westport, Conn.-based Fermat Capital Management L.L.C. are playing a larger role in the market for insurance-linked securities. Solely dedicated to investing in these products, these funds raise money from a variety of sources including sovereign wealth funds, endowments, pension funds and wealthy investors.

Cory Anger, New York-based managing director at GC Securities, a unit of Guy Carpenter & Co., said the influx of stable money, such as pensions funds, into the insurance-linked securities market is noteworthy.

“The mix of capital market investors continues to change,” she said. “It ebbs and flows with the market environment.”

Judith Klugman New York-based managing director and head of insurance-linked securities distribution at Swiss Re Capital Markets Corp., said the surge in demand for the products makes sense in light of the dearth of investment opportunities elsewhere. “The financial crisis has really driven home the point that having an asset that's diversifying is not a bad thing to add to the mix,” she said.

Ms. Anger said that the fact that products such as catastrophe bonds are not correlated to wider political events is a draw for investors.

“Investors are always looking for investment diversification, and catastrophe bonds bring that,” she said. “Whether the wind is blowing or the ground is shaking has nothing to do with the financial markets.”

When Tallahassee, Fla.-based Citizens Property Insurance Corp. issued its first-ever catastrophe bond in May, the investor base varied widely by investor type and geography, said Sharon Binnun, chief financial officer of the state-run property insurer of last resort.

“We looked at the investors in the cat bond, and of the 32, 30 of them do not participate in the traditional cat bond space,” she said. “We added 30 new players from all over the world.”