ILS market insights: February 2026

The Insurance-Linked Securities (“ILS”) market continued its strong growth trajectory in 2025. A notional amount of USD 24.7 billion was issued in 2025, the highest yearly volume in the history of the ILS market. Capital inflows throughout the year along with benign market losses have created an environment of high demand for ILS. Outstanding notional was just short of surpassing the USD 60 billion mark by year-end, up from approximately USD 48 billion at the end of 2024.

Primary issuance again exceeded maturities, demonstrating a positive net cash flow into the ILS market. Compared with previous years, the 2025 issuance pattern remained front loaded around the first half of the year, but issuance continued to be active into the fourth quarter. From a risk perspective, Swiss Re Capital Markets (“SRCM”) observes a market that continued to be dominated by US wind exposures. 2025 also saw increased use of ILS instruments for secondary perils and non traditional risks including cyber, wildfire-only and severe convective storm-only cat bonds. While the California wildfires in January demonstrated the destructive potential of wildfire risks, cat bond issuance containing wildfire exposure regained traction, demonstrating that the market is broadening and able to support a variety of perils.

During periods of macro financial volatility and headline risk from tariffs and global growth concerns, the ILS market once again displayed its low correlation to broader fixed income and equity markets. Returns for investors, as measured by the Swiss Re Cat Bond Total Return Index, demonstrated solid risk-adjusted performance. This was supported by high running coupons and limited direct loss activity affecting outstanding cat bonds, resulting in a return of 11.4% for the year. This edition of Insurance Linked Securities Market Insights reviews primary and secondary market developments in 2025, provides an updated view on Swiss Re’s cat bond indices, and examines key themes shaping the market. A special focus section discusses the role of parametric solutions – with Hurricane Melissa as a case study – and explores how parametric cat bonds can help address the protection gap for catastrophe exposed economies.