The insurance-linked securities (ILS) market is coming off a remarkable year, bolstered by record catastrophe bond issuance. According to Jean-Louis Monnier, Head of ILS at Swiss Re Capital Markets the momentum was driven by a mix of significant capital inflows and low market losses, which has ultimately helped create a high demand environment for ILS.
The firm’s report shows that the ILS market reached a new milestone last year, with catastrophe bond issuance reaching a record $24.7 billion, while the outstanding cat bond market approached $60 billion.
“Capital inflows throughout the year along with benign market losses have created an environment of high demand for ILS. Outstanding notional was just short of surpassing the USD 60 billion mark by year-end, up from approximately USD 48 billion at the end of 2024,” said Monnier.
However, according to Artemis’ data, total issuance across Rule 144A and private cat bond transactions tracked reached over $25.6 billion in 2025, beating the previous record of just under $17.7 billion set a year earlier in 2024. While the outstanding catastrophe bond market also ended 2025 at a record size of just over $61.3 billion.
SRCM’s report also outlined that over the five‑year period from 2020 to 2025, the implied compound annual growth rate (CAGR) of the catastrophe bond market was at 13.5%. However over the three-year period from 2022 to 2025, the CAGR stood at 19.0%, which according to the firm, highlights the “sustained structural demand for ILS capacity.”
Moving forward, Monnier also observed that during periods of macro‑financial volatility and headline risk from tariffs and global growth concerns, “the ILS market once again displayed its low correlation to broader fixed income and equity markets.”
“Returns for investors, as measured by the Swiss Re Cat Bond Total Return Index, demonstrated solid risk-adjusted performance. This was supported by high running coupons and limited direct loss activity affecting outstanding cat bonds, resulting in a return of 11.4% for the year,” he said.
Moreover, Monnier also noted that primary issuance once again managed to exceed maturities in 2025, demonstrating a positive net cash flow into the ILS market.
“Compared with previous years, the 2025 issuance pattern remained front‑loaded around the first half of the year, but issuance continued to be active into the fourth quarter. From a risk perspective, Swiss Re Capital Markets (“SRCM”) observes a market that continued to be dominated by US wind exposures,” the executive said.
Adding: “2025 also saw increased use of ILS instruments for secondary perils and non‑traditional risks including cyber, wildfire-only and severe convective storm-only cat bonds. While the California wildfires in January demonstrated the destructive potential of wildfire risks, cat bond.”
Consistent with recent years, 2025 also saw a solid mix of repeat issuers and first‑time sponsors accessing the cat bond market.
Over the course of last year, Artemis counted 15 first-time cat bond sponsors that entered the market for their debut issuances.
“First‑time sponsors continued to come predominantly from the US property insurance and regional carrier segments, often seeking additional capacity and alternatives to traditional reinsurance. At the same time, government entities and public pools continued to use cat bonds as part of their disaster risk financing strategy, building on precedents established in earlier years,” Swiss Re Capital Market’s report explained.
2025 also saw a continuation of innovation and increasing complexity within certain transactions across the cat bond market. This included instances of more regular utilisation of cascading and multi-event structures, higher-frequency coverage for secondary perils, and aggregate structures aimed at capturing a series of mid-sized events instead of focusing on a single significant catastrophe.
Additionally, a number of new perils found their way into the cat bond space, with Germany parametric earthquake sponsored by Sparkassen-Finanzgruppe, along with Israel earthquake sponsored by Migdal Insurance Company.
Swiss Re Capital Market’s also outlined how Hurricane Melissa, which struck Jamaica in late October last year as a Category 5 hurricane, demonstrated the ability of parametric catastrophe bonds to provide swift liquidity after a major disaster.
With winds nearing 185 mph (298 km/h), Melissa ranked among the most powerful storms ever recorded in the Atlantic basin, causing catastrophic damage from wind, flooding and landslides.
Following the devastation of Hurricane Melissa, Jamaica received significant payouts, which included a 100% payout of its $150 million IBRD CAR Jamaica 2024 parametric catastrophe bond, alongside $91.9 million from its CCRIF SPC parametric excess rainfall policy.
And lastly, throughout 2025 Asia also made important steps towards expanding cat bond protection for earthquake risk in China and India.
Examples include Peak Re’s Black Kite Re Limited (Series 2025-1) issuance which combined industry-loss coverage for Japanese earthquake and typhoon with parametric earthquake triggers for Mainland China and India, which marked the first time that India earthquake risk had ever been included in a 144A cat bond, and also counts as a rare appearance for China earthquake risk.
“Taiping Re also accessed the market through its Silk Road Re notes, covering China earthquake and US named storms; however, the transaction reached ILS investors via a private Rule 4(a)(2) placement rather than the more common Rule 144A route. Together with continued policy debate in India on using cat bonds for major natural perils, these developments point to a gradual broadening of the cat bond market into Asian seismic risk,” Swiss Re Capital Markets added.
