Japan just marked the first anniversary of its devastating 9.0 earthquake and tsunami. Closer to home, in early March, off-season tornadoes wreaked havoc in Indiana, Ohio and Kentucky.

With Mother Nature on the warpath, it might seem like an odd time for catastrophe bonds to be making a comeback, but issuance of these short-term, high-yielding bonds linked to insuring against natural disasters may “break the $5 billion mark this year for the first time since 2007,” according to a report issued in February by Willis Capital Markets & Advisory, the investment banking arm of the New York City – and London-based global insurance broker.

And $5 billion “may be a little bit conservative,” says William Dubinsky, the head of insurance-linked securities at Willis, noting another estimate from one of the industry’s top investment managers, John Seo, the co-founder of Fermat Capital Management of Westport, Connecticut, which has $2.1 billion in insurance-linked assets under management. On March 2 at the Securities Industry and Financial Markets Association’s annual conference on Insurance- & Risk-Linked Securities in New York City, Seo said that with $3 billion to $4 billion “already committed to the cat bond market in 2012,” he had “no doubt” issuance could hit $7 billion this year. If it does, that would make for a 62.8 percent increase from last year’s $4.3 billion in the natural disaster category. (There is another type of cat bond linked to “life” risks like pandemics, but that is a much smaller and less active sector.)

Part of this year’s surge is pent-up demand. Last year was an off year due to the Japanese earthquake, which was such a major event the reinsurance market froze while the initial damage was being assessed. But there was another reason why issuance fell off last year. During the first quarter of 2011, one of the major risk-modeling agencies — Risk Management Solutions, or RMS, of Newark, California — instituted major revisions to its model for forecasting U.S. hurricane risk. “Global warming was one of the drivers in the RMS changes — the higher frequency of events coming out of warming waters,” says Luca Albertini, the chief executive officer of Leadenhall Capital Partners in London. The changes “threw the market into confusion and created uncertainty” about the pricing of both new and existing bonds, Dubinsky says, noting that U.S. hurricane risk is about 70 percent of the natural disaster cat bond market. It took time for the market to absorb the changes, and the new-issue market did not start to ramp back up until the fourth quarter, when $2 billion was issued.