Catastrophe bonds are high-yield debt instruments that allow insurers to transfer some of the risk and cost of natural disasters to investors. (Credit: Sanoor/Adobe Stock)
Catastrophe bonds saw their second largest period ever in the first half of 2025, according to a report from Swiss Re Capital Markets.
Issuances passed $17 billion in the first six months of the year, and overall market size reached $55.8 billion. Major bond sponsors, including State Farm, Allstate and Florida Citizens, secured placements exceeding $750 million each.
The catastrophe bond market has grown more than 75% since 2020 as the bonds play a growing role as an alternative funding source for insurers and reinsurers.
Catastrophe bonds are high-yield debt instruments that allow insurers to transfer some of the risk and cost of natural disasters to investors. Catastrophe bonds pay high interest rates and can help diversify investors’ portfolios, but investors can lose all or part of their principal if a pre-defined natural disaster occurs before the bond matures.
The catastrophe bond market grew in the first half of this year even as large natural disasters, including the LA wildfires and severe storms, hit in America and abroad. The Swiss Re report found the disasters had little impact on the catastrophe bond market.
Tariffs and economic volatility have also had little impact on the catastrophe bond market so far, the report said. SwissRe sees continued growth for the catastrophe bond market through the rest of the year.
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