Cat Bond Market Sets New Pace in Q3 2025 as Annual Issuance Nears $20 Billion

The catastrophe bond and insurance-linked securities (ILS) market continued its strong 2025 performance through the third quarter, with $1.036 billion in risk capital issued across 23 transactions. While Q3 is typically the slowest period due to hurricane season and a preference for privately placed deals, issuance exceeded the 10-year average and marked the fourth-largest Q3 in market history.

The bulk of capital—$665 million—came from six full Rule 144A property cat bond transactions. However, privately placed cat bond lite deals dominated in number, with 17 transactions contributing $371 million in capital. Sponsors ranged from repeat issuers like Swiss Re and SageSure to Mercury Insurance, which debuted its first full Rule 144A cat bond covering California wildfire and fire-following earthquake risk.

With year-to-date issuance reaching $18.6 billion, the sector has already surpassed 2024’s full-year record and is on track to break the $20 billion mark for the first time. Market experts attribute this momentum to growing investor appetite, increased participation from new sponsors, and the continued use of cat bonds as mainstream risk transfer tools. Pricing trends showed further softening, with average spread multiples declining while spread-above-expected-loss metrics ticked up slightly, signaling continued strong investor demand.

Looking ahead, Q4 only needs $1.4 billion in new issuance to cement the record year—well below the $2.8 billion average for that quarter. Barring an unexpected slowdown, the cat bond and ILS space is poised to close 2025 with historic volume and sustained market confidence.