Private ILS fund returns strong again in May. Cat bond funds also positive: ILS Advisers

Across the insurance-linked securities (ILS) fund sector the month of May 2025 was a positive one, with the average across all private ILS and catastrophe bond funds tracked by the ILS Advisers Fund Index reaching a +0.79% return for the period.

The ILS Advisers Fund Index tracks the performance of the insurance-linked securities (ILS) fund sector and steadily, through recent months, the private ILS funds that allocate to collateralized reinsurance and retrocession positions as well as cat bonds, have outpaced the pure cat bond funds.

After the first-quarter of 2025, thanks to the impacts of the California wildfires, the ILS Advisers Fund Index return for 2025 sat at -0.44%.

April then saw the Index turn slightly positive for the year, thanks to continued cat bond performance and a strong month of private ILS fund returns.

Now, with the average return across all the ILS fund strategies tracked reaching 0.79% in May (after 84% of results are in from ILS managers) the ILS Advisers Fund Index now stands at +0.87% for the year to the end of that month.

Driving the performance in May 2025 was the aforementioned private ILS funds, which averaged 1.19% across the group.

Pure catastrophe bonds funds also performed well though, averaging 0.54% for the month.

All of the 31 ILS funds tracked by ILS Advisers that have reported so far were positive for the month, but there was a wide dispersion.

Seasonality begins to have an effect in May, but we understand from sources there have also been some recoveries of value to certain wildfire affected positions invested in by some private ILS funds.

As a result, the worst performing of the 31 ILS funds tracked posted a +0.35% return for May 2025, while the best performing posted a significant +4.41% for the month.

Seasonal effects are likely to become an increasing driver for private ILS fund performance, as reinsurance premiums accrue.

Absent any meaningful catastrophe events, the Index has the potential to deliver very attractive performance over the next few months of reporting, with the Atlantic hurricane season now the main threat we’d typically see at this time of year.

You can track the ILS Advisers Fund Index here on Artemis. It comprises an equally weighted index of 37 constituent insurance-linked investment funds which tracks their performance and is the first benchmark that allows a comparison between different insurance-linked securities fund managers in the ILS, reinsurance-linked and catastrophe bond investment space.