Cat bond market grows at 15.5% CAGR since 2021. Strong momentum continues: Swiss Re

The catastrophe bond market continued its strong momentum in 2026 driving another record period of issuance in the first-half of the year and analysis from global reinsurance firm Swiss Re’s Capital Markets division shows that since 2021 the outstanding cat bond market has been expanding at a roughly 15.5% compound annual growth rate.

Over the first six months of the year the insurance-linked securities (ILS) market “continued to reaffirm” its important “role as a deep and resilient source of catastrophe risk capital,” Swiss Re explained in its new ILS market report today.

2026 began with “strong momentum” on the back of a record year of issuance of new cat bonds in 2025, with activity supported by a “robust investor demand and a steady pipeline of new and returning sponsors seeking protection.”

As a result, Swiss Re notes that the US $17.6 billion of new catastrophe bond issuance in H1 2026 set a new record for the first-half, surpassing the previous high set one year earlier.

Jean-Louis Monnier, Head of ILS at Swiss Re Capital Markets commented in the new ILS market report, “Primary market activity remained broad, with repeat sponsors continuing to access the market for peak US wind, earthquake and multiperil protection, while first-time sponsors benefited from the market’s continued ability to absorb both peak and diversifying risks.

“This momentum persisted even as risk spreads returned to pre-Hurricane Ian lows, with all-in yields remaining attractive relative to expected loss and returns available from traditional fixed income alternatives.”

While no major catastrophe losses affected the catastrophe bond market during H1 2026, there were macro factors that have driven volatility across investment markets, which has helped to further heighten attraction to catastrophe bonds and ILS.

Swiss Re’s new ILS market report highlights the growing role of catastrophe bonds at the key mid-year reinsurance renewals.

“Notably, active May issuance in both 2025 and 2026 underscores the market’s increased reliance on the catastrophe bond market for the June 1 renewals, especially when sponsors observe favourable market conditions throughout the quarter,” the report explains.

High-levels of primary issuance have helped the cat bond market continue to grow, outpacing a heavy maturity schedule and attracting additional capital from investors through the first-half of the year.

By Swiss Re’s numbers, notional cat bond limit outstanding reached US $64.8 billion at June 30th 2026, rising from US $59.8 billion at year-end 2025.

The reinsurance company explains that the growth of the cat bond market over recent years has been at a 15.48% CAGR, which you can see below.

“This sustained expansion highlights the increasing relevance of ILS capacity as part of sponsors’ broader risk transfer strategies, as well as continued investor demand for diversifying catastrophe risk,” Swiss Re comments in the report.

While 12 new sponsors entered the cat bond market in H1 2026, including ILS fund manager backed structures, and new sovereign sponsors also came to market, the majority of the growth in notional limit outstanding came via established players Swiss Re’s report notes.

“State Farm, Allstate, SageSure and USAA each issued catastrophe bonds in H1 2026 with notional exceeding each sponsor’s respective scheduled maturities, increasing their outstanding catastrophe bond protection. The four sponsors collectively increased their outstanding notional by almost USD 3.0 billion, materially contributing to the market’s growth,” Swiss Re explained.

Conversely, residual market cat bond sponsors Florida Citizens and TWIA both reduced their cat bond limit outstanding, as their reinsurance needs declined this year.

“These larger early redemptions, together with the USD 10.2 billion of scheduled maturities during the first half of the year, released significant investor capital to be made available for redeployment into new catastrophe bond issuances,” Swiss Re said. “Despite the large level of redemptions and maturities, Figure 5 (reproduced below) shows that net cash flow into the catastrophe bond market remained firmly positive during H1 2026, with an estimated USD 5.0 billion of net new capital entering the market.”

There was a broadening of coverage seen in the cat bond market during H1 2026, with more secondary peril type exposures ceded to investors, Swiss Re also highlights in the new report.

Over 50% of issuance in H1 2026 was cat bonds where more than 90% of their expected loss was made up of US wind (hurricane) risks. But meaningful capacity was also offered by investors for cat bonds exposed to other perils and international transactions.

Swiss Re commented, “Under favourable market conditions in the broader reinsurance market, sponsors were keen to broaden the scope of coverage. While many transactions continue to cover the peak perils of US wind and US earthquake, a number of issuances now provide coverage for secondary perils, namely severe thunderstorm and/or US wildfire, on a remote, per occurrence basis. Although investors continue to exercise caution against the potential aggregation of frequency losses against annual aggregate structures, the above trend demonstrates the acceptance of such risk perils for select sponsors who have demonstrated the remoteness and integrity of the structure.”

Monnier summed up, “Against a backdrop of heightened macroeconomic uncertainty and ongoing geopolitical conflicts, catastrophe bonds continued to demonstrate low correlation with broader financial markets, reinforcing the asset class’s appeal to investors seeking attractive risk-adjusted returns and portfolio diversification.”