Takeaways from 2025, and Notes on the Year Ahead

2025 was another significant year for the catastrophe bond market as it reached new levels of growth and was heavily battle-tested.  

When reflecting over the past year, one of the primary takeaways is just how large the cat bond market has become. By July, cat bond issuance had already reached a new annual record of $17.8B. By year end, new cat bond and insurance-linked security issuance ultimately achieved a one-year all-time high just shy of $25B.

Deal sizes have also increased. Midyear, when cat bond issuance hit its former one-year annual record of $17.8B, the total issuance was achieved in 74 transactions, compared to the 95 transactions that occurred to reach the previous year’s record. 

The total cat bond market is now worth an estimated $60.6B, and the insurance-linked securities marketplace (of which catastrophe bonds are a subset) has also significantly grown and was already achieving recordbreaking $21B through Q3 of this year. 

Performance has also continued to be strong. Through mid-December, cat bonds gained around 11% year-over year, (measured by the Swiss Re Global Cat Bond Index) - which appears attractive performance when compared to other areas of the bond market, like the Bloomberg Global Aggregate Bond index.

While reviewing 2025, the 100%, $150M payout of Jamaica's World Bank-sponsored parametric cat bond following the devastation of Hurricane Melissa is certainly worth mentioning. While this did trigger a loss for its investors, it also serves as a reminder that cat bonds provide an important purpose in the reinsurance market. This triggered cat bond ultimately assisted with providing Jamaica faster disaster relief funding, aiding in the country’s rebuilding process and ultimately providing long-term confidence in the market and its structure. (For the wary investor, it’s important to remember how rare capital losses are, which we discussed in a November blog post.) 

Overall, 2025 demonstrated yet again the growing appetite for alternative assets and why they might be an attractive addition to more investor portfolios, a trend we don’t expect will slow down. 

So what could this mean heading into 2026? Looking ahead, rating agencies such as Moody’s are already expecting another strong year of issuance thanks to high risk-transfer needs from insurers and governments, and investor demand for diversification and returns.  

With growth in mind, here are few themes retail investors should watch for in 2026: 

• More perils and more sponsors. Cat bonds will likely diversify further beyond U.S. hurricanes, and include deals covering more perils, more regions and from more sponsors. These deals will likely cover earthquakes, windstorms, and possibly wildfires or floods, expand into European coverage and may come from smaller insurers and sovereigns following Jamaica’s example.  Nearly $14B of existing cat bonds are set to mature over the next year, giving issuers a natural opportunity to refinance into new 2026 deals. Now that cat bond reinsurance is a proven method, it’s likely we’ll see a broader set of threats covered and by more participating organizations.
• Increased analysis of wildfires. 2025 is the most active year ever for wildfire-exposed cat bonds, with over $3.3 billion of such issuance (more than the previous record in 2024 and despite huge LA wildfire losses). Risks from wildfire-related losses as their ferocity increases has left insurers and utility providers looking for solutions to offload risk.
• Still-attractive spreads, but some compression. As capital keeps flowing into cat bonds and competition grows among more issuers, coupons may edge down, but are still likely to exceed similarly rated corporate bonds.
• Product innovation. With the growing investor interest in cat bonds, it’s likely that we’ll see new products and commingled funds from more, non-institutional organizations to create greater access for retail investors.
• Climate and model risk in the spotlight. After costly 2025 wildfires and other disaster-related losses in the broader insurance marketplace, investors will scrutinize catastrophe models and deal structures even more closely. However, investors have more access to data and an opportunity to educate themselves better today than perhaps ever before.

We remain convinced that cat bonds are no longer an obscure corner of the reinsurance industry; they’re becoming a mainstream risk-diversifier. This means that for investors looking to access them, 2026 could offer continued growth, solid income, and genuine portfolio diversification.

Sources:

Brookmont Capital Management 

Insurance Journal

Artemis

The World Bank

Reinsurance Business Magazine