This blog post is intended to build on one of the case studies from our recent white paper, Risk Transfer & Resilience: How Catastrophe Bonds Support Disaster Recovery and Portfolio Stability. Our goal is to expand the short case study into a deeper analysis for cat bond investors looking for market insights and education.
When Hurricane Ian roared ashore in Florida on September 28, 2022, it reshaped the disaster insurance landscape. The Category 4 storm inflicted $113 billion in total damages and became one of the costliest hurricanes in U.S. history. For insurers, it was a stark reminder of the concentrated exposure along the Gulf Coast. For investors in catastrophe bonds (cat bonds), it was the kind of “worst case” scenario skeptics often point to: a powerful storm hitting a densely insured region.
The ultimate story of Ian was not one of collapse, but of resilience. Catastrophe bonds absorbed the shock, re-priced risk, and ultimately delivered positive returns in the years that followed. As we move into the 2025 hurricane season, which is forecast to be above average and anticipating 3-5 major hurricanes1,2, Ian’s lessons provide a roadmap for investors and risk managers.
In the immediate aftermath of Hurricane Ian, cat bond indices fell sharply as the Swiss Re Global Cat Bond Total Return Index dropped nearly 10% in late September 2022. With live index tracking only available back to 2021 and UCITS cat bond fund index tracking available back to 2011, Hurricane Ivan represented the largest decline in either index’s history.
Headlines raised fears of systemic impairment to the ILS market and a handful of Florida-exposed bonds did see heavy mark-to-market losses as loss estimates for Ian ranged from $30 billion to over $100 billion.(1) One issuer anticipated Ian-related losses of 7-12% just days after the storm, but ultimately reported losses of 2-3% which were “significantly lower than original estimations”.(2)
As loss development narrowed, a different story emerged. By year-end 2022, Swiss Re Index had already recovered to +6% - an almost 16% trough-to-top jump from Ian’s initial sell-off. In 2023, the index posted +19.7% return which was largely fueled by investor demand for high-spread issuance.
Diversification, it appeared, had ultimately won the day. While some individual tranches absorbed losses, the diversified global market stabilized quickly. Within months, investors recognized that Ian was an extreme but contained event, which validated the resilience of collateralized structures.
The outcome of Ian mirrored what we saw again with the 2025 Los Angeles wildfires: even record-setting catastrophes rarely translate into systemic investor capital losses.
This year’s hurricane season is projected to be above normal(3,4). Thankfully today’s cat bond investors continue to benefit from some structural lessons that were identified during Ian that continue to mitigate investor damage.
How should investors react to hurricanes during peak storm season?
Hurricane Ian was a real-time stress test, and the market passed. Investors who stayed the course were rewarded with strong positive returns the following year. We know that storm activity is likely to be elevated this year, lessons from the past show us that catastrophe bonds can provide opportunity in active seasons.
For allocators and advisors, the lesson is clear: cat bonds are not designed to avoid volatility, but to ensure capital preservation and attractive yields over full cycles. With another intense hurricane season on the horizon, Ian’s story is a timely reminder that catastrophe bonds are built to withstand the storms.