Investor interest in cat bonds and ILS outpaces market issuance growth: Guatteri, Swiss Re ILS

Swiss Re is seeing broader and more engaged interest in catastrophe bonds and insurance-linked securities from institutional investors, with this increasing even faster than the substantial issuance growth seen in recent years, according to Mariagiovanna Guatteri, CIO, Swiss Re Insurance-Linked Strategies Inc.

Speaking with Artemis around the time of the 2026 Monte Carlo Rendez-Vous de Septembre (RVS) reinsurance industry event, Guatteri explained that investors in ILS are increasingly appreciative of the deep in-house understanding of perils that a global reinsurer can provide.

Discussing the health of the catastrophe bond and insurance-linked securities market, Guatteri acknowledged an inevitable move along the risk curve as the market expands, something she sees as reasonable as long as returns remain adequate for the risks being assumed.

Guatteri explained to us, “We view the ILS market — and the catastrophe bond market in particular — as fundamentally healthy. Risk-adjusted spreads continue to exceed our technical return hurdles, and terms and conditions have generally remained disciplined.

“While we have seen issuers expand coverage to include more secondary perils, we do not view this as a negative development provided pricing adequately reflects the incremental risk. More broadly, insurers continue to strengthen their risk management, exposure monitoring and mitigation capabilities, which should contribute to lower loss volatility and improved risk transparency over time.

“Overall, while a growing market requires continued discipline around underwriting and pricing, current market fundamentals remain supportive.”

The need for continued discipline extends beyond just the capital providers and allocators to the ILS sector, Guatteri believes, with it being in the interests of all parties in the market chain to maintain an equilibrium, in terms of risk-adequate returns.

She said, “Market discipline should not be expected solely from investors and portfolio managers; dealers, issuers and other market participants all play an important role in maintaining a healthy market.

“While strong investor demand and increasing capital have supported market growth, preserving discipline across the value chain will remain essential to ensure that pricing appropriately reflects risk and that the market remains resilient over the long term.”

Guatteri then highlighted the rising opportunity for this market, as investor interest continues to grow and those already allocating to cat bonds and ILS are doing so with increasing levels of sophistication in their approach.

“Institutional interest in ILS continues to grow, outpacing even the substantial issuance growth in recent years. We are seeing both broader interest from investors new to the asset class and increasingly sophisticated engagement from those who have been active for many years,” Guatteri explained.

Adding that, from Swiss Re’s point of view, “In our conversations with investors, deep in-house understanding of the underlying perils is becoming an increasingly important differentiator when selecting an ILS manager.”

For those investors, Guatteri believes it remains critical for them to focus on how resilient their ILS investments would be across a range of eventualities, making the risk analysis and modelling expertise of ILS manager’s vital as the market becomes increasingly sophisticated and complex.

“Investors should focus on the resilience of portfolios across a range of market and loss scenarios, as well as a manager’s ability to identify and capture attractive risk-adjusted opportunities as the market evolves,” Guatteri told Artemis in our interview.

“This includes the capability to assess emerging or less-established perils through sophisticated risk modeling, underwriting expertise and disciplined portfolio construction. Equally important are alignment of interests, consistency of investment philosophy and a demonstrated ability to navigate different phases of the market cycle while maintaining investment discipline.”

As to how Swiss Re ILS can differentiate itself to attract clients, Guatteri explained, “From an investment management point of view, our key differentiators are consistent performance through the market cycle and access to Swiss Re’s extensive risk expertise. Combined with our underwriting insights, proprietary risk assessment capabilities and market access, these strengths enable us to deliver attractive risk-adjusted returns while remaining a trusted partner to both investors and cedents.”

Looking ahead, Guatteri said that while the market may become increasingly competitive, especially if loss activity remains light, she also believes this could continue to stimulate demand from protection buyers.

Guatteri concluded by saying, “We expect catastrophe bonds to remain predominantly focused on remote risks, although lower-layer transactions are likely to become more common. This trend is not concerning in itself, as long as the additional risk is transparent, well understood and adequately compensated.

“If loss activity remains benign through year-end, we would expect competitive pressures and spread compression to continue. However, these conditions should also encourage further issuance, supporting continued growth and liquidity in the market and providing some support to spreads through increased supply.”

Ultimately, that could make the reinsurance capital the ILS market provides even more important and deeply embedded in cedent towers, suggesting a home can be found for the funds that may be driven towards the space, from the still rising investor interest.

Read all of our interviews with ILS market and reinsurance sector professionals here.