Cat bond maturities and coupons fuel capital, issuance to exceed $20bn again: Aon Securities

Catastrophe bond issuance is expected to exceed $20 billion for the second year in a row in 2026, according to Aon Securities, with the maturity schedule seen as a “constructive” market feature that when added to coupon earnings means cash and capital levels for fund managers and investors have been particularly high this year.

Writing in Aon’s latest reinsurance market report, the insurance-linked securities team at the broker’s Aon Securities division describe a catastrophe bond market that has been firing on all cylinders in 2026 so far.

With first-half issuance of catastrophe bonds already having set a new record, as we detailed in our brand new quarterly report this morning, Aon Securities is bullish on the potential for $20 billion to be eclipsed again.

The investment banking and ILS unit of Aon explains that expansion of the ILS market’s capital base has been “predominantly driven by notable 144A catastrophe bond issuances.”

“Pricing remains attractive for catastrophe bonds, supporting strong issuance volume and record outstanding capacity,” the company said.

Significant capital has been recycled into the market in the first-half of the year, which has helped sponsors achieve larger deal sizes than their maturing cat bonds in many cases.

“Catastrophe bonds remain the cornerstone instrument as the market finishes Q2 2026 in a position of notable strength,” Aon Securities said.

The broker-dealer puts the outstanding cat bond market at more than $65 billion, which is relatively closely aligned with our end of H1 2026 figure of $65.6 billion.

Aon now sees catastrophe bond pricing as back at around 2021 levels, with spreads tightening by around 3% over the second quarter, “as investors now have more capital to deploy than expected heading into the peak of the wind season.”

The company highlights the significant number of larger cat bond placements of $500 million or more, counting nine in the first-half of the year.

“These large deals reflect many buyers utilizing catastrophe bonds for strategic purposes and placing a larger portion of their reinsurance needs into the ILS market. For insurance and reinsurance buyers, the current environment represents a compelling window to access multi-year, fixed-cost protection at attractive terms, with investor demand remaining deep and diversified,” Aon Securities explained.

Adding that, “For investors, stable spreads, robust deal flow and returning capital from maturities continue to support attractive risk‑adjusted returns and portfolio diversification, especially against a backdrop of historically low credit spreads and broader macroeconomic instability.”

Aon’s own benchmark index for the catastrophe bond sector has returned 3.42% in 2026 by June 12th, which was up on the prior year.

The broker’s capital markets unit said, “This reflects continued attractive spreads in the catastrophe bond market, alongside elevated collateral returns and no principal impairments during year-to-date. Seasonality is also a factor, as returns typically accelerate through the wind season, assuming no major loss events.”

Aon notes that the cat bond maturity schedule has been a “particularly constructive feature of the market” in 2026.

Scheduled cat bond maturities reached record levels in 2026 so far and this has returned “substantial capital” to investors just in advance of the wind season.

This combined with coupons being earned by cat bond funds and investors meant, “the amount of capital available to be recycled into new issuances is significant,” Aon Securities said.

Some investors are on-track for their fourth year of double-digit returns in a row from their catastrophe bond allocations, which is unprecedented in the market’s history and means coupon earnings have been particularly high, helping to keep the market awash with cash to absorb new issues.

Over 60% of sponsors that had maturities in 2026 and came to market in H1 have increased their cat bond capacity relative to what was expiring, the broker highlighted.

In addition, the peril scope of the catastrophe bond market has continued to expand in 2026, satisfying more of the investor demand for diversification within the asset class.

This reflects, “greater investor comfort with non-peak perils and more cedents using capital markets alongside reinsurance,” Aon believes.

Adding, ” North American hurricane risk still dominates by expected loss, but diversification is structural and likely to accelerate as modeling and investor familiarity improve.”

Looking to the end of the year, Aon Securities commented, “2026 is on track to have another strong issuance year”

The company highlights the record level of issuance achieved in Q2 and H1 2026, which you can read more about in our new quarterly cat bond market report here.

“Aon anticipates year end 2026 will exceed $20 billion of issuances for the second year in a row,” the company stated.

Aon’s report concludes, “Third-party capital is now firmly embedded as a core pillar of the (re)insurance risk transfer ecosystem. With the ILS market approaching $141 billion in limit, record outstanding catastrophe bond issuances, spreads back near 2021 levels, a heavy wave of maturities recycling capital and strong returns for investors, the current environment is distinctly a well-balanced market. At the same time, rapid growth in casualty sidecars and a broader suite of perils and structures show how capital markets solutions are becoming more flexible and better aligned with cedents’ evolving risk and capital needs.”

Download your copy of the new Q2 and H1 2026 Artemis cat bond market report here.