Catastrophe bond issuance exceeded $US21 billion ($32.1 billion) in the year to June as the broader insurance-linked securities market had its most “active and dynamic” period, Aon says.

Issuance volume increased 21% from a year earlier, and the June half had 56 transactions valued at nearly $US17 billion ($26 billion).

The average deal size has also increased, reaching $US302 million ($462 million), up 12% on the previous year.

“The market has seen a surge in issuance activity since 2023,” Aon says in a report.

“This increase has been largely supported by favourable market conditions, with investors generating double-digit returns across consecutive years … further aided by the absence of severe loss activity.” 

Aon says the role of catastrophe bonds in reinsurance programs is evolving from being tail protection to more of a complementary and strategic source of risk transfer across all layers.

“Insurers are increasingly turning to the ILS market to complement their traditional reinsurance programs, adopting a more strategic and blended approach to risk transfer.”

The report says catastrophe bonds provide multiyear, collateralised protection, offering diversification from traditional reinsurance while helping clients manage price volatility.

“As total insured values continue to rise, driven by factors such as higher building costs, insurers are increasingly seeking coverage beyond what is available in the traditional reinsurance market.”

See the report here.