Record issuance of property/casualty catastrophe bonds in 2014 has put players and observers in a bullish mood about the alternative risk transfer market's prospects for 2015 and beyond.

While the final tally had yet to be calculated last week, Aon Benfield Securities' mid-December issuance of the $375 million Nakama Re Ltd. bond to cover Japanese earthquake risks pushed through the $8 billion barrier to $8.7 billion, surpassing the previous record $7.86 billion in 2007.

“2014 was exciting because on the nonlife side it was a record-setting year for cat bond issuance and the capital markets, both with respect to insurance-linked securities and more broadly, and that is causing people to think going forward that a lot more might be possible,” said Bill Dubinsky, head of ILS at Willis Capital Markets & Advisory in New York.

A mid-October note from the Willis unit said 2014 was on track for total cat bond sales of between $8 billion and $9 billion.

“We as a firm have been very bullish about the amount of capital that's going to continue to flowing into the sector, so I think this more or less substantiates what we have been saying,” said Paul Schultz, CEO of Aon Benfield Securities in Chicago.

Catastrophe bonds, most of which covered U.S. risks such as earthquakes and severe thunderstorms in 2014, also covered Japanese earthquakes and European windstorms.

One observer said the market's performance could be a harbinger for further growth.

“We are not surprised at all,” said Jeff Mohrenweiser, senior director with Fitch Ratings Inc. in Chicago. “We would think that we could see another $6 billion to $8 billion in issuance in 2015, possibly even going as high as $10 billion” amid ongoing strong demand.

Helping to drive 2015 is about $6 billion in cat bonds that will mature during the year, Mr. Schultz said.

“There are a substantial amount of catastrophe bonds that are maturing in 2015, which we believe will be reinvested,” he said. “So in addition to normal cash flows available to be deployed into the sector, there is a good amount of cash which will be recycled within the sector.”

“We'll see a lot of rollover where those bonds will get reinvested back into the market,” Mr. Mohrenweiser said.

While rates the cat bonds pay investors have declined somewhat as the market has become more competitive, returns still are strong enough to attract investors and stimulate market growth, experts say.

“It's still better than what you can get for other short-term investments,” said Gary Martucci, a director at Standard & Poor's Corp. in New York.

“While there is still great opportunity, and we see growth, the returns investors have been able to achieve have declined. So some investors at the margin are disappointed in the sense that they'd rather have more, but seem happy for the most part in the returns they've achieved,” Willis Capital's Mr. Dubinsky said.

“On a relative basis to other asset strategies into which investors can deploy capital, this is still one of the more attractive sectors for return on investment,” Aon Benfield's Mr. Schultz said.

Larger deal sizes could help drive growth into 2015 and beyond, as could the introduction of additional perils into a market dominated by U.S wind exposures.

“We are definitely seeing a trend toward larger transactions,” Mr. Schultz said.

“What we are expecting if not next year then over the next couple of years is the introduction of additional perils not typically covered by catastrophe bonds,” said S&P's Mr. Martucci, citing earthquakes in China, New Zealand and Chile as well as U.S. floods as potential additional perils covered by cat bonds.