Catastrophe bond issuance surged 45% to a record US$25.6 billion in 2025, eclipsing the previous year's US$17.7 billion as insurers increasingly turned to capital markets to offload peak exposures, according to analysis from Howden Capital Markets & Advisory.
The growth came from transaction volume rather than deal size, with 122 catastrophe bonds issued during the year compared to 95 in 2023, data from the reinsurance intermediary showed. Fifteen first-time sponsors entered the market, while returning issuers structured transactions across multiple perils and geographic zones.
The record issuance pushed the outstanding catastrophe bond market to US$61.3 billion by year-end, with December alone posting US$4.9 billion in new issues – the second-largest month in market history, industry data showed.
"What we saw through 2025 and into the January renewals was catastrophe bonds firmly establishing themselves as a core component of clients' risk management frameworks," said Mitchell Rosenberg (pictured above), co-head global ILS at Howden.
The surge came despite insured losses from natural catastrophes reaching US$107 billion in 2025, driven largely by Los Angeles wildfires that generated US$40 billion in claims – the highest insured wildfire losses on record, Swiss Re Institute figures showed.
Severe convective storms added another US$50 billion in insured losses globally, making 2025 the third costliest year for such events.
Yet investor interest remained robust, with the Swiss Re Global Cat Bond Performance Index returning approximately 11% in 2025 – the third consecutive year of double-digit returns for many catastrophe bond fund strategies.
Second-half bond maturities and sustained demand contributed to double-digit spread compression by year-end, though pricing remained within ranges acceptable to both sponsors and investors.
The growth occurred as traditional reinsurance pricing declined roughly 10% at mid-year 2025 renewals, with property catastrophe rates falling in the upper teens, broker estimates indicated.
Catastrophe bonds added approximately US$6 billion in net new issuance in 2025, while traditional reinsurance capital grew by around US$45 billion in 2024, J.P. Morgan analysts noted. The investment bank said it does not view catastrophe bonds as particularly disruptive given their limited scale versus the traditional industry.
Still, the instruments offer structural advantages including full collateralization and multi-year commitments, compared to one-year reinsurance contracts that carry counterparty risk.
Institutional investors including California Public Employees' Retirement System allocated to the sector based on return comparisons with credit markets. Investors who entered following Hurricane Ian in 2022 sustained their positions throughout 2025.
"The ability to connect traditional reinsurance with ILS, catastrophe bonds and collateralized structures is no longer optional," said Jarad Madea, chief executive of Howden Capital Markets & Advisory.
For 2026, Madea said capital deployment would reflect investor selection criteria and structural development, with transparency and execution certainty becoming increasingly critical as the market evolves.
