Following a record-breaking year for the catastrophe bond market, reinsurance broker Howden Re has outlined how these insurance-linked securities (ILS) instruments have remained in favour due to their liquidity and more standardised structure.
“In the current environment, they can often offer more favourable pricing than traditional reinsurance, driving further interest from sponsors,” the broker said.
2025 was a substantial year for the catastrophe bond market. Artemis’ data shows that for the first time annual issuance exceeded $20 billion, rising by 45% year-on-year to $25.6 billion across full 144A and private transactions.
Moreover, the final quarter of the record-breaking year saw over $7 billion of new cat bond issuance from 27 transactions comprised of 45 tranches of notes, which therefore made Q4 2025 the fifth-largest quarter ever.
You can download your copy of the new Q4 and Full Year 2025 Artemis cat bond market report here.
“This exceptional expansion has been a key supply-side driver throughout the year and into the 1 January 2026 renewals, supported by a growing number of new sponsors entering the market,” Howden Re said.
The firm also noted that catastrophe bonds have emerged as a crucial element of numerous reinsurance programs, pointing out that they frequently provide more favourable pricing compared to conventional reinsurance, thereby generating increased interest from sponsors.
“Multi-year catastrophe bonds increasingly serve as strategic cornerstones of reinsurance programmes, rather than opportunistic supplements,” Howden Re added.
Reflecting on the January 2025 Los Angeles wildfires, while it was a significant event for the re/insurance industry, Howden Re highlighted how the event had a minimal impact on the catastrophe bond market.
“Although secondary spreads widened slightly, no material principal losses were recorded. The muted effect of such events continues to reinforce investor confidence that – even following major insured losses – the implications for overall returns remain modest in what is still a compelling pricing landscape,” Howden Re’s report reads.
However, while average cat bond transaction sizes remained relatively stable throughout 2025, the number of transactions increased significantly.
As mentioned, annual cat bond issuance reached $25.6 billion in 2025, a significant milestone for the market.
“Catastrophe bonds remain the preferred ILS instrument due to their liquidity and more standardised structure. The market now also offers a broader range of risk profiles for investors, across the risk spectrum, and by peril / geographic scope and structure,” Howden Re concluded.
