Managing cat bond allocations as market spreads normalise: Artemis London 2026 video

At our Artemis London 2026 catastrophe bond and insurance-linked securities conference in September, a session focused on catastrophe bonds explored how advances in modelling can help investors further assess risk, and why managers should be cautious about encouraging investors to over-allocate to the asset class when spreads are below average.

This second panel session of the day was titled “From hard market to normalisation: Cat bond discipline in practice.”

The panel was moderated by Nils Ossenbrink, Head of Distribution and Products, Twelve Securis.

He was joined by: Florian Steiger, CEO, Icosa Investments AG; Charlotte Acton, Senior Director, Risk Advisory, Moody’s; John DeCaro, Founding Partner, Elementum Advisors; and Jonathan Gray, Chief Underwriting Officer, Pool Re.

While one of the key takeaways from the session was that discipline in the asset class remains crucial as the market softens, panelists also discussed the need for robust risk assessment as spreads compress, and the value of improving catastrophe risk models, while recognising that models are simplifications and should not be treated as definitive.

Highlighting this, Acton said, “I think naturally, as spreads do compress, then there’s less room in there for error and a robust understanding of what goes into that expected loss number that sits within an offering material becomes increasingly important. How sensitive is it to different assumptions that may be made along the way?

“I think particularly, if attractive spreads are becoming slightly harder to find within more familiar risks and newer perils are becoming more attractive, then the analytical bar for those new perils shouldn’t lower.”

The discussion also cautioned against encouraging cat bond investors to over-allocate when spreads are below average, with DeCaro emphasising that managers should preserve credibility and capacity for when the market hardens.

“We want to be mindful of not getting investors to over-allocate when spreads are below average in the soft part of the cycle, because you want to maintain credibility when the market begins to harden, to come back and say now is the time to deploy excess capacity. Instead of just chasing returns because the cat bond market looks relatively attractive compared to other things,” DeCaro said.

The panelists also considered whether “normalisation” accurately describes the cat bond market.

Steiger preferred to call it a softening market, saying, “The market is definitely getting softer. I’m not sure if it’s soft yet. Another judgement call. But from a pure investor perspective, of course, the softening of the market is not what you would like to see, you would like to see rates as high as possible.

“But then, whoever invested in 2023 would have been naive to think rates or premiums would stay where they were back then. I think the industry was very vocal to tell people, ‘hey, it’s great to invest right now, enjoy it while it lasts’. But it was not going to remain at those levels,” the CEO said.

In addition, Gray observed that cat bond market participants generally consider themselves disciplined, but said that growing capacity and investor interest create an opportunity to demonstrate it.

“Is the market becoming more disciplined? The experts, I think, could well be quite right here. It’s very difficult for a buyer, I think, to judge just how that is going. But certainly with there being more capacity, more interest, more people involved, all of those things, I think, lead to the opportunity to demonstrate discipline,” Gray said.

Watch the full video from our Artemis London 2026 conference to learn more about the current state of the catastrophe bond market and our expert speakers thoughts on discipline through the softening market phase.

Thank you again to everyone who attended Artemis London 2026, to our expert speakers and our supportive sponsors.

We will return to London next year and look forward to seeing many of you at our Artemis London 2027 conference.

Our Artemis ILS NYC 2027 conference will be held on February 5th next year. Tickets are now available.

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