Alternative capital reaches record $121bn high
Catastrophe bond issuance surpassed $21 billion during the most active 12-month period in the history of the insurance-linked securities market, global professional services firm Aon plc has reported.
The 19th edition of its ILS Annual Report also highlights how sidecar capacity increased to an estimated $17 billion across both property and casualty lines.
Analysing the 12 months ending June 30, the report highlights that total outstanding catastrophe bond volume had reached a record $55 billion by the end of the period, representing a 19 per cent increase compared to June 30, 2024.
The first half of 2025 witnessed the structuring of 56 catastrophe bonds with an issuance total of $17 billion, matching the issuance total for full year 2024 in just six months.
Average deal sizes increased, with H1 2025 transactions averaging $302 million, a 12 per cent rise compared with H2 2024.
The heightened catastrophe bond activity reflected growth in the broader ILS market, where alternative capital had reached a record $121 billion by June 30.
Sidecars continued to grow owing to their relatively high underlying margins and the introduction of the casualty sidecar product, which now accounts for about 8 per cent of the overall sidecar market.
The report reveals that catastrophe bonds generated a return of 14.1 per cent for investors over the 12-month period under review, based on the Aon Securities Catastrophe Bond Total Return Index.
Overall losses from hurricanes Beryl, Helene and Milton, alongside record-setting California wildfires, were manageable for investors.
The report further highlights dominant trends in the catastrophe bond sector.
Insurer participation increased to 58 per cent of total catastrophe bond issuance, driven by rising capital requirements linked to model changes and a growing appetite for diversified, multiyear coverage.
Regional concentration intensified, with 93 per cent of new issuances covering North America perils. The report said this reflected investors’ comfort with American risk models and broader risk margins.
Florida-focused issuances increased to a record $5 billion — a 46 per cent increase over the prior year period and representing 16.6 per cent of the total outstanding catastrophe bond market, which the report said highlights investor confidence in peak-zone protection.
Catastrophe bond maturities increased to $12.9 billion during the period under review. Much of the associated capital re-entered the sector, with 52 repeat clients and 13 new entrants contributing to a record client count.
Richard Pennay, chief executive of Aon Securities, said: “Driven by higher building costs, evolving weather trends and the push to close the protection gap, cedants are increasingly seeking coverage beyond what is available in the traditional reinsurance market.
“With the uncorrelated nature of catastrophe bonds, and investors achieving double digit returns, the space continues to demonstrate its value and outpace growth in other areas of the insurance industry.”
• For more on the Aon Securities ILS Annual Report — September 2025, see Related Media
You must be Registered or to post comment or to vote.
