Aon’s Catastrophe Bond Total Return Index delivered 11.6% return in 2025

Coming off a substantial year for the catastrophe bond market, Aon Securities, the capital markets and insurance-linked securities division of the insurance and reinsurance broker, reported that its Catastrophe Bond Total Return Index generated a return of 11.6% for 2025.

Despite catastrophe bonds facing spread tightening throughout the year, the market managed to achieve strong double digit returns for 2025, the firm noted.

2025 was of course a highly memorable year for the catastrophe bond space, with annual issuance exceeding $20 billion for the first time, rising by 45% year-on-year to $25.6 billion across full 144A and private transactions.

The year closed with a record fourth quarter issuance of over $7 billion, the fifth-largest quarter ever. To read more about that quarter, download your copy of Artemis’ new quarterly catastrophe bond market report here.

Aon Securities noted that the cat bond market sustained minimal principal losses in 2025 from major events such as the January Los Angeles wildfires and Hurricane Melissa which passed over Jamaica in late October.

The firm estimates that catastrophe losses from 2025 will be less than 1.5% of the outstanding market’s total for 2025, which Aon estimated at $59 billion.

Artemis’ data shows that new issuance across both full 144A and private transactions took the outstanding market to a record $61.3 billion at year-end.

Moreover, Aon Securities also noted that relatively high interest rate returns enabled investors to achieve collateral returns exceeding 4% over the course of the year.

In 2025, investor returns were additionally supported by the tightening of market spreads, which increases the prices of outstanding cat bonds and results in mark-to-market accretion.

Data from Aon Securities also shows that as of mid-December 2025, the weighted average secondary price of the outstanding catastrophe bond market is 2.4% above par value.

It’s important to remember that the bonds will mature at par (if they are not event impacted), which therefore means that investors will return the gains in future years.

However, this factor, along with the tighter spreads in the new issuances, may ultimately put downward pressure on catastrophe bond returns throughout 2026, Aon Securities warned.

With cat bond investors achieving returns of 18.6% in 2023, 15.5% in 2024, and now 11.6% in 2025, Aon anticipates a rise in overall investor demand in 2026, with the ILS asset class continuing to offer investors risk-adjusted, diversifying returns.

Aon’s cat bond index return can be compared to the Swiss Re Global Cat Bond Performance Index, which delivered a total return of 11.40% for 2025.

While forecasts are for the return potential of the cat bond market to be in single digits for 2026, given tighter risk spreads, the running yield of the catastrophe bond market sits at just under 9% currently and relative to other asset classes and diversifiers this remains very attractive to investors.