Catastrophe Bond Market Surges to $45.6 Billion in Outstanding Capital

The catastrophe bond (CAT bond) market has achieved remarkable growth, with a total of $45.6 billion in outstanding capital as of June 2024, according to Aon’s ILS Annual Report. This surge was fueled by $12.2 billion in new transactions, marking a record issuance across 76 deals over the past year. This expansion in the CAT bond market coincides with increasing demand for insurance and reinsurance capacity, driven by inflation, shifting weather patterns, and efforts to close the protection gap. The coupon yield on CAT bonds over the period also attracted new capital, offering an estimated $6.2 billion in returns.

The ILS market witnessed significant diversification in both sponsors and risks. Government and multinational sponsors contributed to a broader geographic spread of risk, while primary insurers increased their presence, pushing issuance volume to $9.3 billion. Key issuers included the California Earthquake Authority, Citizens Property Insurance Corp. in Florida, and the Texas Windstorm Insurance Association. The rise in aggregate issuance following Hurricane Ian in 2022 further solidifies investor interest in CAT bonds, with secondary trading showing high activity as well. The ILS sidecar market also saw a boost, setting a new record of $10 billion in outstanding volume.