Aon has revealed that catastrophe bond issuance surpassed US$21 billion, with sidecar capacity simultaneously increasing to an estimated US$17 billion across both property and casualty lines, in the company’s Insurance-Linked Securities (ILS) Annual Report. The report highlights that during the 12-month period ending 30 June 2025, outstanding catastrophe bond volume had increased 19 per cent to a record US$55 billion, compared to 30 June 2024. Moreover, according to the report, the first half of 2025 saw 56 catastrophe bonds structured with an issuance total of US$17 billion, matching the issuances for the entirety of 2024 in six months, in addition to average deal sizes increasing, with H1 2025 transactions rising 12 per cent to an average of US$302 million. The surge in catastrophe bond activity was representative of growth in the broader ILS market, the report says, with alternative capital reaching a record US$121 billion by the end of the 12-month period. Furthermore, sidecars continued to grow due to relatively high underlying margins and the advent of casualty sidecars, accounting for approximately eight per cent of the overall sidecar market. The ILS report also revealed a 14.1 per cent return on catastrophe bonds for investors over the 12-month period under review, which is based on the Aon Securities catastrophe bond total return index. Overall losses from Hurricanes Beryl, Helene, and Milton, in conjunction with California wildfires, were considered manageable for investors, which the report says demonstrates the general remoteness of ILS products. Insurer participation also increased to 58 per cent of total catastrophe bond issuance, with the report attributing it to rising capital requirements and linked to a “growing appetite for diversified, multi-year coverage”. North American regional concentration also intensified, with 93 per cent of new issuances covering the area, underlining investor comfort with US risk models, in addition to the appeal of broader risk margins. The report also highlights a 46 per cent increase, to a record US$5 billion, over the prior year period in Florida-focused issuances, which represents 16.6 per cent of the total outstanding catastrophe market. During the same period, catastrophe bond maturities increased to US$12.9 billion, with much of the associated capital re-entering the sector, including 52 repeat clients and 13 new entrants, also contributing to a record client count. CEO of Aon Securities, Richard Pennay, says: “Driven by higher building costs, evolving weather trends, and the push to close the protection gap, cedants are increasingly seeking coverage beyond what is available in the traditional reinsurance market.”
