A $275 million catastrophe bond providing insurance protection to US train company Amtrak illustrates a growing trend of corporations going directly to the capital markets to cover some of their risks, according to an insurance-linked securities (ILS) expert.

PennUnion Re Ltd is a Bermudian special purpose insurer created by Amtrak. Its variable rate notes have been admitted for listing on the Bermuda Stock Exchange.

Andre Perez, chief executive officer of Horseshoe Group, which specialises in ILS services, believes the latest issuance is further evidence that the demand for cat bonds and ILS is a trend set to continue.

“Particularly so, for large corporations with substantial risk,” he said.

“It makes sense for these large corporate entities to directly access the market. They can form a captive and have an SPV [special purpose vehicle].”

Mr Perez said that doing so was more efficient from a cost perspective, giving access to fresh capacity and also helping with risk diversification.

“I know there are large corporations out there that are thinking about it, and I would not be surprised if we see more and more of these,” he said. “It also means investors are getting closer and closer to the risk.”

The perils covered by PennUnion Re are storm surge in New York City and Delaware, named storm wind protection across eight northeast US states, and earthquake protection in five of those states. The Series 2015-1 notes will become due in December 2018.

The issuance comes after a traditionally quiet third quarter for the cat bond and ILS market, when a fraction over $1 billion worth of bonds and notes were issued.

When asked if the ILS market might be altered in the wake of a major disaster triggering payouts, Mr Perez said: “Cat bonds in general are at a high level of loss. If they are triggered, the chances are there will have been a massive, market-changing event.

“Most investors know the risk they are taking, and if there is a market-changing event, then rates will go up and investors will see that as a new opportunity.”

In its third quarter report on the cat bond and ILS market, Artemis.bm estimated the total outstanding cat bond and ILS market was $25.02 billion, which is higher than at the corresponding point in 2014.