ILS market insights: February 2025

The Insurance-Linked Securities (“ILS”) market continued the growth trend of recent years in 2024, with the last 12 months marked by a robust performance for cat bond investors in the absence of events large enough to have a significant impact on the market.

The ILS market has grown by 10.5% year-on-year and is on track to exceed the USD 50 billion mark of outstanding notional in the near future. A large maturity pipeline across the year, complemented with elevated coupon returns and capital inflows, most notably for UCITS funds, have supported the growth of the outstanding notional in the market seen at year-end.

A strong issuance pipeline contributed to the growth of the market despite a large volume of bonds maturing, with a very active Q2 and Q4 helping the year reach USD 17.2 billion of primary issuance. Although the risk profile of the market remains orientated towards US perils, Swiss Re Capital Markets (“SRCM”) observed a wide variety of risks offered this year with a broad range of covered areas, a further ceding of cyber risks to the market and even a new peril, terrorism, on behalf of the French State pool GAREAT.

Returns for investors as measured by the Swiss Re Cat Bond Total Return Index, although not as strong as in 2023, ended the year at solid levels that should consolidate the value proposition of the asset class in comparison to other credit products and maintain the attractiveness for new players in the space.

Finally, although 2024 experienced one of the most active calendar years ever in terms of industry insured losses from cat events across the globe, losses were spread among a relatively high number of medium severity events as well as secondary perils such as wildfires, hailstorms, thunderstorms and floods. In general, most ILS instruments are designed to cover peak perils and trigger after very high severity events such as major earthquakes and hurricanes. However, events from previous years have continued to develop, and the ILS market has supported the industry with close to USD 440 million of recovery payments to sponsors recorded in 2024 related to those past events.