The devastating Palisades and Eaton wildfires that struck the Los Angeles area in January 2025 served as a real-world stress test for outstanding wildfire catastrophe bond structures, while also increasing investor confidence in allocating to the wildfire peril, according to Swiss Re Capital Markets.In its recently published ILS market insights report, Swiss Re Capital Markets, the insurance-linked securities (ILS) and catastrophe bond structuring division and investment banking unit of the global reinsurer, outlined that one of the defining themes of the cat bond market in 2025 was the rapid expansion of coverage for wildfire risk, alongside traditional peak perils.However, the firm also noted that the 2025 catastrophe year was active across several peril regions, This was largely driven by a high frequency of medium-sized events, including severe convective storms and wildfires, rather than by a concentration of major peak-peril catastrophes.Against this backdrop of moderate peak-peril loss activity, one key development that stood out within the ILS space was the U.S.

wildfire season, which led to increased scrutiny of wildfire risk across modelling, structuring, and risk assessment.“This heightened focus ultimately proved supportive for the market, with substantial capacity deployed into wildfire-exposed catastrophe bonds, including the largest wildfire-only cat bond to date through the Golden Bear transaction for the California FAIR Plan.Together, these developments helped shape investor sentiment and structuring considerations, setting the stage for the thematic discussions that follow,” Swiss Re Capital Markets explained.

the California FAIR Plan managed to secure the upsized $750 million of wildfire reinsurance from its first Golden Bear Re Ltd.(Series 2026-1) catastrophe bond deal in December, which officially became the largest wildfire cat bond ever by a significant margin.The FAIR Plan returned earlier this year to secure $400 million more in wildfire reinsurance through sponsorship of its second cat bond.

Reflecting on the increase seen on wildfire-exposed cat bonds in 2025, Swiss Re Capital Markets said, “In 2025, the market issued more wildfire-exposed cat bonds than ever before.Investor appetite for wildfire risk appeared driven by a confluence of factors: improved wildfire modelling, refined contracts and structures.” Swiss Re Capital Markets outlined that both the Palisades and Eaton wildfires have not triggered outstanding U.S.wildfire catastrophe bonds paying out on a per-occurrence basis, but noted, that the events heavily contributed towards a number of aggregate structures.

“Somewhat counterintuitively, both wildfire events significantly increased investor confidence into wildfire cat bonds.Indeed, these events served as a real-world stress test for outstanding cat bond structures,” the firm continued.“Importantly, the subsequent major update in wildfire modelling reflected work that had already been in progress at modelling agents, with the rollout aligning in timing with the wildfire season rather than being directly triggered by it.” Concluding: “In parallel, primary rate increases and underwriting tightening were already progressing ahead of the wildfire events.

Combined, these dynamics helped support issuance conditions for wildfire-exposed cat bonds, even as the insurance and reinsurance sector absorbed significant losses.” Wildfire exposure has heavily expanded within the cat bond market over recent years.As you can see in the chart below, following the end of 2025, Artemis had tracked and analysed some $5.55 billion of new catastrophe bond issuance that had some exposure to wildfire risk last year.With 20 cat bonds containing wildfire exposures and 4 of those being pure wildfire cat bonds.

So far in 2026, we have seen 1 pure wildfire cat bond and 8 multi-peril cat bonds that feature wildfire risk as a peril, with some of those still being in the market.Currently, total wildfire-exposed cat bond issuance in 2026 is already tracking towards more than $2.95 billion, with room for some of the still in the market transactions to grow.The catastrophe bond investor base has clearly become more open to assuming wildfire risk in recent years, with insurance-linked securities now providing growing reinsurance limits to cover the peril.

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