The catastrophe bond market has become widely accepted as a reinsurance and risk transfer tool, and as the sponsor base increases while risk-adjusted returns for cat bond investors remains attractive, Moody’s Ratings said today it anticipates 2026 could be another busy year for insurance-linked securities (ILS).In a new report on the cat bond market, Moody’s utilises extensive data from Artemis to display a picture of a catastrophe bond market that is healthy, growing and increasingly in-tune with sponsors needs.Moody’s explains that the recent trend of strong catastrophe bond issuance is expected to persist into 2026.Stating, “The catastrophe bond market continues to experience strong growth in 2025, driven by robust demand from sponsors seeking risk transfer capacity and by investors attracted to the sector’s strong risk-adjusted returns.

“As of 28 August 2025, .“We expect total issuance to exceed $20 billion by year end, given that there are still four months remaining in 2025 and issuances in the last four months of 2024 amounted to around $5 billion.” The rating agency continued, “Although property catastrophe reinsurance pricing declined during reinsurance renewals this year for more risk-remote layers at the top of reinsurance programs, pricing remains attractive on a risk-adjusted basis.“As a result, we expect the catastrophe bond market to continue to grow as sponsors seek to complement the use of traditional reinsurance in their risk management programs and investors seek to benefit from the strong returns.” Appetite from investors for catastrophe bond returns remains high and the asset class continues to deliver performance that beats many of its asset class benchmarks.

While returns have fallen in line with softer reinsurance pricing, on a risk-adjusted basis and compared to historical periods of the market, catastrophe bonds remain very attractive.Citing Artemis’ data again, Moody’s highlights that the record cat bond issuance so far this year suggests a market whose dynamics are set to persist.“The increase reflects high property catastrophe reinsurance demand, elevated reinsurance prices and generally attractive returns for investors in alternative capital.

We expect these conditions to lead to further growth in the catastrophe bond market in 2026, with providing a strong base for new issuances,” the rating agency said.The record catastrophe bond issuance we’ve recorded this year reflects both “elevated reinsurance demand and the widespread acceptance of cat bonds as a mainstream risk transfer tool,” Moody’s said.The catastrophe bond market continues to adapt to sponsor needs as well, with broadening coverage as evidenced this year by , Moody’s notes.

In addition, the evolution of the sponsor base, while still very US focused, suggests increasing adoption by smaller carriers and a diverse range of companies.Of course, how active the catastrophe bond market is next year will decide on numerous factors, from the state of reinsurance pricing, how competitive conditions are between ILS and traditional capacity, the occurrence of loss events, and even the macro environment.But the stage is certainly being set for another busy one and , it is to be expected the cat bond market continues to execute at attractive levels for sponsors, while the current expectation is that discipline remains to protect investor interests as well.

.We track , the most prolific sponsors in the market, most active , which risk modellers feature in cat bonds most frequently, plus much ., or via the  which provides a handy one-page view of cat bond market metrics..

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