Following Hurricane Melissa’s devastation of Jamaica this fall, one might assume that the 2025 hurricane season was a historic one. Earlier this year, even the National Oceanic and Atmospheric Administration (NOAA) predicted heightened activity, anticipating a 60% chance of an above-normal season thanks to factors such as warmer ocean temperatures and reduced trade winds. Even the Insurance Information Institute anticipated nine hurricanes by the end of November. However, the 2025 hurricane season was more mild than expected, and more tame than previous years.
By the end of October, there were only five recorded hurricanes, a number that jumps to 12 if considering tropical storms - or perils that reach between 39 and 73mph. By contrast, the average number of combined hurricanes and tropical storms per year since 2015 is 18 - meaning 2025 saw a 30% decrease in activity.
With so many cat bonds structured around hurricane damages, what should investors take away from the 2025 hurricane season?
At the highest level, more projected disaster risk typically equates to more investment opportunities. This year was expected to have a large and dramatic hurricane season after several years of increasing activity. As a result, more insurance & reinsurance companies are turning to cat bonds for protection. For investors, this gives them more products to invest in and more competition, which could also lower barriers to entry.
Of course, predictions are just predictions, no matter how well-informed. There was a significant difference between the expected 2025 hurricane season and what it actually was. Predictions about more storms, and storms of greater size and strength, might deter some investors, but this year was ultimately a reminder about the infrequency of triggering events.
In addition, most of the cat bond trigger risk is tied to perils impacting the United States. About 70% of the existing cat bonds worldwide are currently tied to US wind and hurricane damage. In 2025, not a single hurricane made landfall in the US.
For first-time cat bond investors, 2025 offers several lessons. This year can be seen as a “live lab” year: monitor how actual hurricane landfalls, loss tallies, and payouts play out, and then compare those to the modeled assumptions in cat bond structures you might invest in.
Key questions for investors consider might include:
Answering these questions could help investors evaluate the attractiveness of these potential investments.
Overall, 2025 continues to be shaping up to be a big year for the cat bond market. For the first time ever, issuance is on track to hit $20B in a single calendar year. The market is sizable and continues to grow. For investors, this could lead to more choice among investible issues, more competition thanks to the presence of new issuers, and more visibility into the bond issues themselves. Investors can likely expect an increase in cat bond liquidity and choice.
Sources:
Brookmont Capital Management Internal Research
National Hurricane Center (NHC)
WaterStreet Company
National Oceanic and Atmospheric Association (NOAA)
The Washington Post