Cat bond market momentum positions 2025 for exceptional year of issuance: Swiss Re

Catastrophe bond market momentum is anticipated to continue through the second-half of 2025, which added to a significant record set for the first-half leads Swiss Re Capital Markets to say the cat bond sector is positioned for an exceptional year of issuance.

Publishing its H1 2025 ILS Market Insights report today, Swiss Re Capital Markets highlights the robust activity levels seen through the first-half of this year in the catastrophe bond marketplace.

Jean-Louis Monnier, Head of Insurance-Linked Securities explained, “The first half of 2025 has reaffirmed the Insurance-Linked Securities (ILS) market’s status as a compelling and resilient asset class. Amid a backdrop of macroeconomic uncertainty and evolving risk dynamics, catastrophe bonds have continued to deliver attractive yields, low volatility, and low correlation to traditional markets.

“With over USD 17 billion in notional issuance across nearly 60 transactions, 2025 has already positioned itself as one of the most active periods in the market’s history. Investor demand has remained robust, supported by elevated collateral yields, a healthy maturity pipeline, and a growing appetite for diversified risk exposures – including higher-frequency and multi-event structures, as well as new sponsors and perils.”

As our readers will now be aware, just in the opening days of the second-half, the annual catastrophe bond issuance record has already been broken.

While a perhaps more meaningful record was also set in recent weeks, as catastrophe bond issuance between August 2024 and July 2025 has now reached just slightly under $23 billion, marking a landmark stretch of activity for this segment of the insurance-linked securities (ILS) market.

In its report, Swiss Re Capital Markets highlights that since 2020 the catastrophe bond market has now expanded by over 75%.

Investors have continued to show strong appetite fuelling this expansion, the investment banking and specialist ILS unit of the global reinsurance firm explained.

In the first-half of 2025, the California wildfires marked a new record for insured losses from the peril, but Swiss Re Capital Markets points out that while the cat bond market faced impacts from this, it was not overly significant.

“Though they marked a new record for wildfire claims, the LA wildfires had a limited impact on the cat bond market due to the relatively low amount of wildfire risk ceded. However, the fires did contribute to the erosion of and losses in aggregate structures,” the company explained.

But even after this, the cat bond market saw two wildfire peril focused transaction in the first-half of this year, which Swiss Re Capital Markets said reflects, “renewed investor focus on secondary perils, nationwide aggregate structures and wildfire modelling.”

In addition to the wildfires, elevated severe convective storm (SCS) activity caused further cat bond markdowns and some erosion of annual aggregate transactions.

“Worldwide index aggregate transactions as well as selected junior layers of indemnity all natural peril aggregate covers have paid out in 2025 which has impacted new issue and secondary pricing,” Swiss Re Capital Markets noted.

You can read about some of the catastrophe bonds that faced losses and markdowns in Artemis’ directory of cat bond loss activity.

Swiss Re Capital Markets put the size of the outstanding catastrophe bond market at almost US $56 billion by the mid-point of the year, growing meaningfully through the record period of issuance activity.

The company puts the compound annual growth rate (CAGR) of the cat bond market at 13.4% since the end of 2020.

“This sustained momentum is expected to continue and is supported on both sides of the value chain by sponsors who have increasing demand for protection and by investors who are expected to have ample liquidity to deploy due to strong projected maturity schedules and elevated collateral yields,” the report explains.

The report looks into the tightening of spreads in the cat bond market, noting that “risk interest spreads have tightened considerably since 2024 and on a weighted average basis have returned to pre-Ian levels.”

However, Swiss Re also points out that treasury yields remain elevated and that higher yielding transactions from 2023 and 2024 continue to earn through for cat bond investors, “contributing to the continued attractiveness of cat bond yields.”

Overall, catastrophe bonds continue to deliver very attractive returns compared to high-yield bond benchmarks, leading the Swiss Re Capital Markets team to state, “This premium underscores the value proposition of the asset class within fixed income portfolios—offering both compelling yield and meaningful diversification benefits relative to comparable credit instruments.”

Swiss Re Capital Markets forecasts that, “Looking ahead, and barring any major disruptive events, we anticipate continued momentum into Q4 which positions the market for another exceptional year of issuance.”

All of Artemis’ catastrophe bond market charts and visualisations are kept up-to-date as deals settle and mature.

For copies Artemis’ catastrophe bond market reports, visit our archive page and download them all.