Secondary market prices of some catastrophe bonds that provide their sponsors aggregate reinsurance or retrocessional coverage have been increasing at what is viewed as being a faster pace, than is typically anticipated, in recent months, with some sources suggesting a contributor is the fact hurricane season has so far run loss-free in 2025.A number of aggregate catastrophe bonds have seen their secondary market prices rising over the last two months, some meaningfully so and more than you’d typically expect for the time of year, which has been an additional factor that has helped to boost performance of cat bond investment strategies during the period.Aggregate cat bonds had seen some heavy mark-downs earlier this year, as well as some losses, as the impacts of the California wildfires in January, as well as the US severe convective storm season, drove prices down as the market’s perception of risk of loss rose for numerous cat bond names.There had been some aggregate cat bond price recovery earlier in the year, as a number of cat bond names did not get triggered in their risk periods that ended around the mid-year reinsurance renewal time.

But more of the outstanding aggregate catastrophe bonds have risk periods that run towards year-end as well and it is some of these which have been seeing price recoveries in recent weeks.Of course, prices have been rising due to market-based factors, with high demand but few actual trades, as well as typical seasonal effects, so it’s a little hard to know exactly how much of a contributor the loss free hurricane season has been.But our sources suggest this has been having an effect for a number of weeks now, with some cat bond prices rising back towards par earlier and faster than anticipated, or increasing further above par at a time of year that more typically may not be expected.

We’ve looked at some cat bond broker pricing sheets from mid-summer and the latest marks to compare how categories of catastrophe bonds have moved.Starting with pure US hurricane exposed aggregate cat bonds, while the wind season has been quiet, these have almost all seen small price appreciations that began as early as September, so in the accepted peak of the tropical season.Yes, market dynamics, of tighter spreads and rising prices are a factor, but these aggregate hurricane cat bonds can often be the more depressed, in terms of pricing and the slower to respond to broader market forces.

So it’s perhaps notable they are moving this year, which either implies much stronger market forces (possibly weight of capital driven demand) or that the market started factoring in the potential for a relatively quieter Atlantic hurricane season earlier than normal.One good example here are some of the Integrity Re cat bonds that provide their sponsor American Integrity with annual aggregate hurricane reinsurance.These were marked in the high-90’s back in July, but some are now up around the 105 or slightly above mark, depending on which pricing sheets you look at.

Aggregate cat bonds from the Alamo and Everglades series had also all priced higher by September than they had been earlier in the hurricane season.Again, it could be market dynamics alone, but it does also feel like the chances of a quiet hurricane season might be getting priced in.Where the quiet (so far) hurricane season effect is more apparent is in some of the international or US nationwide multi-peril catastrophe bond structures.

In this bucket of cat bond deals there are some that had been marked below par for exposure to events earlier in the year, from other perils such as the wildfires and severe storms.But some of these bonds have been recovering, with prices moving back towards par even through the peak of the hurricane season.Given their exposure to earlier events this year, it’s notable that some of these have seen relatively meaningful price appreciation in recent weeks, suggesting the market is becoming more confident that these aggregate cat bonds may get to the end of their risk periods without any losses, even though hurricane season (a peril they are exposed to) is still underway.

The best example of these is the Liberty Mutual sponsored Mystic Re 2025-1 Class C notes, which had been priced at 50 cents on the dollar, or even below, as recently as August (with wildfire and storm exposure still dragging), but are now pricing into the 80’s on most cat bond sheets.We are told by sources that there hasn’t been any meaningful change or reduction in loss estimates for the prior events that eroded the price for these Mystic Re bonds, which suggests this is more of a case of drawing back steadily towards par, but again right through the peak of the US wind season which is one of the covered perils.There has been price appreciation across some of USAA’s aggregate Residential Re cat bonds as well, the Series 2023-1 cohort, while some of Allstate’s aggregate Sanders Re cat bonds have also appreciated more than might be expected for the time of the year.

Of course, occurrence US wind cat bonds have also been appreciating with seasonality and all of this combined has driven strong cat bond fund returns in recent weeks.Sources suggest a growing view that Atlantic hurricane season may not prove especially, or at all, impactful to the catastrophe bond market in 2025 could be one driver of recent price appreciation, for at least certain specific bonds (such as the Mystic) but also more broadly across the market as a contributor to price rises as well.How much of a factor is hard to tell, except for in the case of the most obvious cat bonds like the Mystic Re deal, while the fact we’re seeing strong price appreciation due to market factors at the same time may also be masking some of any effect related to the potential for hurricane season to run loss free.

But it is interesting to see and hear that the market seems to be moving very early towards a view that hurricane season may not prove impactful at all.Which some might say is a bit presumptuous and too early to tell, given the Atlantic tropics can remain active well into November at times..All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.

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