World Bank panel highlights ‘astronomical growth’ of cat bond market

The catastrophe bond market is undergoing a dramatic transformation, marked by record-breaking growth, expanding risk coverage, and rising global participation. These themes were explored by industry leaders during a panel session at the World Bank’s Innovating for Impact: Scaling Outcome Bonds and Catastrophe Bonds event in Luxembourg.

Moderated by Alexandre Delacroix, Executive Director at reinsurance broker Gallagher Re, the session featured Andy Palmer, Head of ILS Structuring for EMEA & APAC at Swiss Re Capital Markets; Joanna Syroka, Director of New Markets at Fermat Capital Management; and Madjer Dehar, Associate Director, Insurance Linked Investments at PGGM Investments, the asset manager for the Dutch pension fund PZFW.

During the panel, Palmer reflected on the market’s early beginnings and the remarkable acceleration it has seen in recent years.

“In the 90s and early 2000s the market was forming; ILS fund managers didn’t really exist. There were some institutions, some multi-strats, who were buying early on, and some reinsurance underwriters thought we could set up a fund manager, let’s try and do that, and they came and so the market formed. And I would say that today, that message, indeed, is stronger than ever before.

“The market has now grown in total size to over $55 billion outstanding. If I look at the end of 2022 it was under $35 billion, so that’s $20 billion growth in two and a half years. So, its astronomical growth, and that really underscores the need that there is for this asset class.”

So far in 2025, catastrophe bond issuance has reached $17.68 billion in the first half alone, just $14 million shy of the all-time annual record. This strongly suggests the market is on track to surpass the $20 billion mark by year-end.

Additionally, Syroka provided historical context and noted how investor interest in the asset class gained momentum during the global financial crisis.

“The market really started back in the mid-90s, after Hurricane Andrew, and then the Northridge earthquake was another big event that rocked the global re/insurance market, but it really took off post the global financial crisis,” she said.

Adding: “During the global financial crisis, investors saw their portfolios that they thought were quite diverse correlate quite quickly to one, but their cat bonds were marked at par, and that really demonstrated that potential diversification of the asset class to them. And since then, our market has continued to grow. So that’s from a very high level, why investors consider catastrophe bonds.”

Attention then turned to the market’s resilience in the face of recent geopolitical and macroeconomic shocks. Dehar pointed out how cat bonds held their ground during the Trump tariff announcements earlier this year.

“I think it’s interesting to note that even given the last term, or with the Trump tariffs in April 2025 we saw that the pricing on the cat bond market held firm. Interestingly, we didn’t see as well, the same phenomenon we observed in 2022 when the Ukraine war started, whereby investors managing total portfolios were dragging cash from the ILS investments to benefit from the entry points on the other asset classes that were depreciated,” Dehar explained.

“We didn’t see that in 2025, which shows that investors start to appreciate ILS in terms of its own relative value and return. And rightfully so, because we saw that if you compare ILS to high yield corporate credit, there’s still an uptick from ILS for comparable expected loss bonds,” he continued.

Clearly, this points to a market that has not only grown in size, but also matured, with investors now viewing insurance-linked securities (ILS) on their own merits rather than as opportunistic play.

Beyond scale, the catastrophe bond market is also diversifying in structure, geography, and peril types. Palmer explained how the U.S. continues to dominate issuance due to its deep insurance market, but new players and risks are entering the scene.

“We’ve seen something like 40 to 50 new sponsors in the last five years, and we’ve seen another nine this year so far, and we’re going to continue to see that.”

Palmer continued: “We’re also seeing new perils, a whole variety. So cyber risk is one which was new a couple of years ago, and that’s there to stay. We’ve seen India earthquake, we’ve seen the French terror pool, the UK flood pool.

“I think we’re growing by any kind of dimension that you can look at, at the moment, and I would suspect in the next three years to see more of the same.”

Palmer also underscored the pivotal role that the World Bank has played in bringing sovereigns into the cat bond market.

“The World Bank has played a very large role facilitating over 90% of the cat bonds that government sponsors have received in the last 10 years. There’s a whole range of government sponsors and different sorts of risks that have been done. The largest and one of the pioneers of governmental usage of cat bonds has been the government of Mexico, which has been doing this for many years. Originally through special purpose vehicle structures, but when the World Bank came in with its own notes issuance program for cat bonds, it has since then been through and supported by the World Bank.”

As the catastrophe bond market continues to grow across every axis, capital raised, perils covered, sponsors onboarded, and geographic footprint, it is clearly continuing to be seen as an essential pillar of global financial resilience.

Read all about the record levels of catastrophe bond market issuance in our new quarterly report here.