Howden Capital Markets & Advisory (HCMA) said catastrophe bonds are firmly established as a core component of clients’ risk management frameworks from 2025 through reinsurance renewal on January 1, 2026.
HCMA noted that catastrophe bond issuance reached a record level in 2025 due to an increase in the number of transactions, with issuance volume increasing by approximately 45% compared to 2024. New and old sponsors alike emphasize that catastrophe bonds are an integral part of global risk transfer rather than a specialist alternative.
Investor demand has kept pace with this growth. Strong demand, coupled with a wave of second-half expirations, pushed spreads to close by double digits at the end of the year, while pricing remained attractive to sponsors and investors. Increasing economic competition compared with traditional reinsurance has accelerated the evolution of catastrophe bonds into a structural backbone in reinsurance programs.
Mitchell Rosenberg, co-head of global ILS, commented: “We see catastrophe bonds firmly establishing themselves as a core component of clients’ risk management frameworks from 2025 through January renewals. Sponsors are no longer using the market solely to replenish capacity; instead, they are using the market to introduce durability, diversification and pricing clarity into their reinsurance strategies – moving from a more tactical use of capital markets capacity to an explicitly strategic use of capital markets capacity.”
Jarad Madea, CEO of Howden Capital Markets & Advisory, added: “These updates highlight how closely connected capital markets and reinsurance outcomes are now. As markets rebalance, the ability to connect traditional reinsurance with ILS, cat bonds and mortgage structures is no longer optional. It is critical to building resilient, efficient programs in a more competitive environment.”
HCMA said investor sentiment in reinsurance and insurance-linked securities (ILS) will strengthen further in 2025, supported by attractive risk-adjusted returns and growing institutional confidence in the asset class.
As appetite expands, investors are increasingly seeking diversification beyond peak catastrophe risk, including non-catastrophe exposures and alternative structures.
HCMA revealed that throughout 2025, market discussions will focus on capital inflows, the risk of market weakness and the sustainability of underwriting disciplines. Investors have shown a preference for structured investments due to a desire for contractual yield, downside protection and transparency.
Strategic partnerships between asset managers and reinsurers have also been deepened, reflecting long-term collaboration around underwriting expertise and float management.
“We are seeing a fundamental shift in the way institutional investors approach this market,” said Cate Kenworthy, managing director at Howden Capital Markets & Advisory. “Capital is no longer chasing headlines or single events. Instead, investors are building long-term allocations with clear expectations for diversification, structure and underwriting quality. The focus has shifted from deployment to sustainability, which we believe is healthy for the asset class.”
Madea concluded: “Capital deployment and trading activity are expected to be impacted by increased investor selectivity, fund life cycle pressures and continued innovation in capital structures. As catastrophe bonds further solidify their structural anchor position in reinsurance programs and more capital is targeted at the industry, continued performance will depend on disciplined underwriting, disciplined reserving and clear coordination between risk takers and investors. In this environment, transparency, execution certainty and well-structured risk transfer will become increasingly important as the reinsurance and ILS markets continue to evolve.”
