The catastrophe bond market has seen very attractive execution on behalf of sponsors so far this year, with a number of factors driving this that have all resulted in abundant capital being available to settle new cat bond issuances, typically at larger sizes and lower pricing.As we’ve explained, new catastrophe bond issuance in 2025 has already surpassed $5 billion settled and .This has helped .Underneath the hood of this accelerating market activity and cat bond market growth, lies very strong execution trends for cat bond sponsors.

Sponsors have benefited from investor appetite, which continues to grow and an investor-base that continues to expand.But they are also clearly benefiting from ample capital in the catastrophe bond sector, as a number of factors have resulted in there being more than sufficient capital to get new cat bond deals to market at very attractive pricing.The catastrophe bond market was almost $49.5 billion, , at the end of 2024.

More than $4.3 billion of catastrophe bonds were scheduled to mature in the first-quarter of 2025 and it’s clear that all of this capital and much more is being utilised to settle new cat bond deals for sponsors, with our issuance projection for the quarter still growing above the $6 billion mark.While the outstanding cat bond market has now reached over $51.4 billion, as of the end of last week, with further growth possible before quarter-end, this ability to redeploy maturities is only part of the story, as it is the other drivers of market growth that are also driving the strong execution being seen.New capital is a factor.

Most of the established catastrophe bond fund managers have grown their strategies over the last six months, with this capital needing to be deployed into the market and the pipeline providing ample opportunity to do so.But, it’s not just new capital from established players.It’s also new players with deep pockets bringing capital into the catastrophe bond space, as well as players that have entered in the last couple of years now upsizing their appetites.

In particular, the multi-strat hedge funds have been deploying more capital into cat bonds over the last six months and we’re told this has been accelerating.One source said there has been well-over half a billion dollars of incremental capital flowing from multi-strat hedge funds into the cat bond space just in 2025 to-date, with that likely to continue now the tap has been turned on.So that’s on-top of any new flows coming via established cat bond managers.

In discussions with market sources, we’re told that the average number of investors on a cat bond order book has increased in the last year and looks set to increase further.No longer are order books dominated by just the main group of insurance-linked securities (ILS) fund mangers, it’s also an increasing number of multi-strat type investors who are buying into new issuance in the catastrophe bond market.That’s good for sponsors and for the market, as diversity of capital sources is always a positive and it means cat bond deals are getting more broadly distributed.

But it is having an effect on price execution, which is positive for the sponsor community and some are taking advantage of this, but is seen more negatively by some established players in the space, we are told.Finally, on new capital, we are told that the more than half a billion of incremental flows from multi-strat type investment managers is growing all the time and likely to continue to do so, which suggests the strong execution opportunity for sponsors will persist.Moving on from net new capital that has been entering the catastrophe bond market, the risk-free rate of return is an often overlooked dynamic that has also been contributing to the market’s ability to execute at very attractive pricing for sponsors.

Consider the fact cat bonds are a market of more than $50 billion and much of that is earning 4% plus in terms of the return on collateral and it suddenly seems like a lot of additional money needing to be deployed.stands at around the 4.3% level at this time and 4.3% of $50 billion equates to around $2.15 billion of risk-free returns flowing back to cat bond funds and investors and effectively growing market capital.We understand some investors are utilising the still-elevated risk-free rate of return as a way to generate some cash flows back from cat bond allocations, but many others seek to redeploy the earnings from their coupons and so this is another key source of additional capital coming to market.

Of course, the coupon investors earn for putting money into catastrophe bonds is made up of more than just a risk-free rate, it includes the insurance risk spread as well, which is typically the larger share.With an average yield of just above 10% in the cat bond market, $50 billion of outstanding bonds can deliver $5 billion or so in coupons to investors over the course of the year, which builds cat bond sector capital and many investors and managers seek to redeploy, while some investors also find ways to extract their profits from the market.Maturities, which we mentioned earlier were always scheduled to be high for the first-half of this year, are going to bring significant cash back to cat bond investors over the coming months.

As we said, .But, for the second-quarter the maturity wall gets even higher, with .That maturity cash is again largely expected to be redeployed where investors and managers can, so is an incremental factor that pressures pricing and delivers strong execution of new cat bond deals for investors.

There is a question though, over whether the cat bond market has already seen issuance front-loaded in 2025 and whether the second-quarter could be a little less busy as a result.But, in discussions with market participants and sources we are told that the expectation is that the first-half of 2025 as a whole will see ample issuance to absorb all of the maturity capital that gets returned.That suggests another first-half of the year that sees well over $10 billion in new catastrophe bond issuance and our sources have also told us that there are expected to be some particularly large new cat bond deals coming to market over the coming weeks.

With all of this new, recycled and excess capital build-up, it is no wonder that catastrophe bond sponsors have been benefiting from really strong execution of new deals and pricing at levels far more attractive than the prior year.Right now, .That’s slightly up on the final quarter of 2024, but is almost a full percentage point down on .

Another way of visualising risk adjusted pricing of new cat bond issuance is to look at ., which is slightly down on the 3.71 times EL seen for full-year 2024.But, quarterly trends in EL’s can be meaningful, as the mix of deals and perils that come to market fluctuates over the year.

While the average multiple of cat bond issuance is , that’s up on the 2.78 times EL seen in Q4 2024, but is down on the 4.1x witnessed a year ago.It’s going to be really interesting to watch the trajectory of these cat bond market metrics over the rest of this year and behind.The build-up of capital in the catastrophe bond sector is presenting a significant opportunity to sponsors, established and new, with the strong execution seen making cat bond backed reinsurance and retrocession an increasingly attractive buy.

The market needs that to remain attractive to keep feeding the capital build-up, especially for large new investors in the space.As a result, the dynamic between traditional and alternative reinsurance capital at the middle of this year renewal season is going to be critical to watch.Competition could become a deterrent that can hold-back further new capital entry, on the one hand.

However, cat bond sponsors (established and new) are still making all the right noises that they are ready to cede more to the capital markets as well.All of which should make for a fascinating few months ahead..All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.

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