The insurance-linked securities (ILS) market maintained its growth trajectory in 2024, with strong performance for catastrophe bond investors amid an absence of major loss events. According to Swiss Re, the market expanded by 10.5% year-on-year and is approaching the US$50 billion threshold in outstanding notional value. A significant volume of maturing bonds, coupled with elevated coupon returns and capital inflows – particularly into UCITS funds – has contributed to the expansion seen at year-end. Despite the large volume of maturities, issuance remained strong, with an active second and fourth quarter supporting US$17.2 billion in primary issuance over the year. Swiss Re Capital Markets (SRCM) observed that while US perils continue to dominate risk allocation, the market has diversified with a broader range of covered risks. The past year saw an increased ceding of cyber risks and the introduction of terrorism risk into the ILS space, with the French State pool GAREAT sponsoring a new transaction. Investor returns, as tracked by the Swiss Re Cat Bond Total Return Index, remained solid despite falling short of 2023 levels. Swiss Re noted that these returns reinforce the asset class’s value compared to other credit products and may continue to attract new market participants. The year was one of the most active in terms of industry-insured losses from natural catastrophe events worldwide, according to Swiss Re. However, losses were dispersed across multiple mid-severity events and secondary perils, including wildfires, hailstorms, thunderstorms, and floods. Most ILS instruments are structured to trigger after high-severity events such as major hurricanes and earthquakes, limiting the direct impact of these smaller losses. At the same time, previous event developments led to US$440 million in recovery payments to sponsors in 2024, reflecting the ILS market’s role in industry risk-sharing.

Catastrophe bond market expands despite high insurance losses – Swiss Re

The insurance-linked securities (ILS) market experienced a 10.5% year-on-year growth in 2024, reaching an outstanding notional value nearing US$50 billion. The market's expansion was driven by strong investor performance amid low insurance losses, with significant maturing bonds and capital inflows into UCITS funds. Despite major natural catastrophe events, the market diversified with increased ceding of cyber and terrorism risks. The Swiss Re Cat Bond Total Return Index showed solid returns, reinforcing the asset class's value compared to other credit products.