Through 2025 and into the January 1, 2026 reinsurance renewals, catastrophe bonds firmly established themselves as a core component of clients’ risk management frameworks, according to Howden Capital Markets & Advisory (HCMA).
HCMA noted that catastrophe bond issuance reached record levels in 2025, with volumes approximately 45% higher compared to 2024, driven by an increased number of transactions. Both new and repeat sponsors reinforced catastrophe bonds as an integral element of global risk transfer, rather than a specialist alternative.
Investor demand kept pace with this growth. Strong appetite, combined with a wave of second-half maturities, drove double-digit spread tightening by year-end, while pricing remained attractive for both sponsors and investors. Increasingly competitive economics, often relative to traditional reinsurance, accelerated catastrophe bonds’ evolution into structural anchors within reinsurance programmes.
Mitchell Rosenberg, Co-Head Global ILS, commented, “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. Sponsors are no longer using the market solely to supplement capacity; instead, they are leveraging it to introduce durability, diversification, and pricing clarity into their reinsurance strategies – shifting from a more tactical to a clearly strategic use of capital markets capacity.”
Jarad Madea, CEO of Howden Capital Markets & Advisory, added, “These renewals underline how closely capital markets and reinsurance outcomes are now linked. As the market rebalances, the ability to connect traditional reinsurance with ILS, catastrophe bonds and collateralised structures is no longer optional. It is central to building resilient, efficient programmes in a more competitive environment.”
HCMA said investor sentiment across reinsurance and insurance-linked securities (ILS) strengthened further in 2025, supported by attractive risk-adjusted returns and growing institutional confidence in the asset class.
As appetite broadened, investors increasingly sought diversification beyond peak catastrophe risk, including non-cat exposures and alternative structures.
HCMA revealed that throughout 2025, market discussions focused on capital inflows, the risk of market softening, and the sustainability of underwriting discipline. Investors exhibited a preference for structured investments, driven by a desire for contractual yield, downside protection and transparency.
Strategic partnerships between asset managers and re/insurers also deepened, reflecting longer-term alignment around underwriting expertise and float management.
“We are seeing a fundamental shift in how institutional investors approach this market,” said Cate Kenworthy, Managing Director, Howden Capital Markets & Advisory. “Capital is no longer chasing headlines or single events. Rather, investors are building long-term allocations with clear expectations around diversification, structure, and underwriting quality. The focus has moved from deployment to sustainability, and we view this as a healthy evolution for the asset class.”
Madea concluded, “Capital deployment and deal activity are expected to be shaped by heightened investor selectivity, fund life-cycle pressures and continued innovation in capital structures. As catastrophe bonds further entrench themselves as structural anchors within reinsurance programmes and more capital targets the sector, sustained performance will depend on disciplined underwriting, rigorous reserving and clear alignment between risk carriers and investors. In this environment, transparency, execution certainty and well-structured risk transfer will be increasingly critical as the reinsurance and ILS market continues to evolve.”
