The Association for Financial Markets in Europe (AFME) has published its response to the European Commission’s Climate Resilience Framework, calling for the use of insurance-linked securities (ILS) and catastrophe bonds as an effective way that insurers within the Union can access new capital to back climate-related policies.
The European Commission’s Climate Resilience Framework is set to be launched in Q4 2026.
The framework integrates both legislative and non-legislative measures, with the objective of creating a more holistic EU strategy for climate resilience and preparedness. It encourages the implementation of a more cooperative model that encompasses governments, insurers, capital markets, and businesses.
“AFME strongly supports the European Commission’s intention to establish a more coherent and ambitious legislative framework for climate resilience. We agree that common climate reference trajectories or scenarios (both short-term and long-term) can provide public authorities, businesses, and communities with a clearer understanding of future climate conditions. This will support more consistent and forward-looking adaptation decisions across the EU,” AFME said in its submission.
In its submission, AFME has also called on the European Commission to consider exploring and streamlining insurance-linked securities (ILS) and catastrophe bonds to help increase protection against secondary perils within the European Union.
“Insurance-linked securities (ILS) and catastrophe (CAT) bonds (primary ILS component) can help transfer defined risks quickly and transparently when a trigger event happens,” AFME said.
Moreover, AFME also observed that insurers can access more risk-bearing capacity by transferring part of peak risks to investors, via catastrophe bonds or similar insurance-linked structures, which would help to free up their balance sheets so that they can keep writing policies.
“Additionally, capital market platforms, bringing together capital providers, underwriters, and insurance seekers, could help insurers access new capital. Targeted public risk-sharing initiatives would also help in areas where risks are too extreme or systemic for private markets to carry efficiently on their own,” AFME’s submission reads.
Importantly, the Association also acknowledged how investor interest in ILS is at a high level and has evolved significantly since the market’s earlier days.
“The amount of alternative capital from insurance-linked investment (ILS) vehicles and third-party investor sources in the global reinsurance market grew by 7% in 2024. This can be explained by strong investor returns and attractive market conditions, and the robust performance of catastrophe bonds. With record high capital levels and sustained interest in the instrument, the ILS market remains a key space for both insurers and investors looking for alternative risk transfer solutions,” AFME said.
Recall that third-party capital reached a record high $124 billion at the end of the third quarter of 2025, marking a $9 billion, or 7% increase from year-end 2024.
While heavy catastrophe bond market activity in 2025 resulted in a record-breaking year for the sector, with it becoming the first year to see over $20 billion of cat bond issuance.
Total issuance across Rule 144A and private cat bond transactions tracked by Artemis reached over $25.6 billion in 2025, beating the previous record of just under $17.7 billion which was set a year earlier in 2024 by a staggering 45%.
Including all 144A cat bonds and the private cat bond deals we track in our extensive Artemis Deal Directory, the outstanding catastrophe bond market ended 2025 at a record size of just over $61.3 billion.
Furthermore, the Association also calls on for the Commission to consider the use of public-private partnerships which would allow for climate-related risks to be shared among investors.
AFME’s submission mirrors the same response that FERMA, the Federation of European Risk Management Association recently gave regarding the commissions proposed framework.
In its recently published submission, FERMA urged the European Commission to adopt a collaborative approach to its climate resilience framework, calling for the use of catastrophe bonds, insurance-linked securities (ILS) and parametric products.
