Investment manager Man Group’s outlook for the catastrophe bond and related insurance-linked securities (ILS) market remains positive as the industry begins 2025, despite there being some distortion seen in industry index deals following strong investor interest.Man Group notes that the cat bond market has received “sustained interest from new and repeat sponsors, as well as continued inflows of alternative capital.” “The reinsurance industry remains well-capitalised and has experienced strong returns to date,” the firm said.Looking back at the fourth quarter of 2024, while the outstanding market also managed to reach a new all-time-high of $49.5 billion.According to Man Group, this trend is expected to continue in 2025, with high sponsor demand and a heavy maturity schedule “driving further issuance.” The investment manager also noted that cat bonds’ market capital reached an all-time high and, while returns in 2024 did not match the outsized returns seen in 2023, “investor interest remains solid.” “Broadly, supply and demand is in equilibrium in the space, although we have noticed some distortion in industry index deals with strong investor interest,” the firm added.

In recent weeks, industry loss index trigger cat bonds have been pricing at particularly low spreads, and in some cases, around as low as we’ve seen for a number of years now.This clearly demonstrates that there has been some divergence in pricing, between index trigger and indemnity cat bonds at times.Man Group also explained that the generally hard reinsurance market means that the return per unit of risk of deals has remained supported heading into 2025.

Focusing on cyber, which as a peril first emerged in the cat bond market in 2023, Man Group suggests that it may possibly emerge as a third peak peril in the near future, offering additional capacity and diversification from US wind and quake.Since their introduction to the market in 2023, there have been 10 cyber cat bonds.In our you can analyse details of almost every cat bond ever issued and filter the list by peril to show only cyber cat bonds.

Man Group also highlighted how France made its way into the market for terrorism cover in late 2024, with GAREAT, the French co-reinsurance pool for terrorism insurance risks, successfully securing the targeted €100 million of terrorism reinsurance from its debut catastrophe bond.However, the investment manager expects terrorism to remain a secondary peril, which will not appeal to all investors.You can read more about this cat bond in our Deal Directory, and Additionally, with the deal set to mature at the end of this month, we understand that its sponsor, Pool Re, has been exploring a renewal of that issuance, which means that there could potentially be another terror cat bond debuting in the market soon.

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