According to Swiss Re, the catastrophe bond market provided approximately $440 million in recovery payments to sponsors in 2024

Swiss Re Capital Markets reported that throughout 2024, several recoveries were made under catastrophe bonds. However, these recoveries were primarily linked to catastrophe losses from previous years, particularly those caused by Hurricanes Ian and Otis. Other significant contributing factors included the 2023 Turkey earthquake, Winter Storm Elliott, and the lingering effects of COVID-19.

In a newly released report, Swiss Re explained that as past events continued to unfold, the insurance-linked securities (ILS) market played a vital role in supporting the insurance industry. The report highlighted that approximately $440 million in catastrophe bond recovery payments were made to sponsors throughout 2024, underscoring the market’s function in facilitating risk-sharing across the industry.

According to Swiss Re analysts, these past catastrophic events also contributed to the erosion of retention levels within many aggregate reinsurance structures. This erosion suggests that insurers had to absorb more losses than expected before their catastrophe bond protection was triggered.

Significant Natural Catastrophes in 2024

Commenting on the natural catastrophe landscape in 2024, Swiss Re Capital Markets noted that the year saw multiple major disasters, including hurricanes, earthquakes, severe convective storms, wildfires, and flood events. These disasters had widespread global impacts, leading to substantial financial losses and devastating human consequences.

Swiss Re Institute released a press statement in early December 2024 estimating that insured losses from natural catastrophes were on track to exceed $135 billion, marking the fifth consecutive year in which insured losses surpassed the $100 billion threshold. Meanwhile, total economic losses from natural catastrophes were projected to reach $310 billion.

The firm noted that two-thirds of these losses were attributed to severe weather conditions in the United States. The country experienced an unusually high frequency of severe thunderstorms and two major hurricanes—Hurricane Helene, which was followed two weeks later by Hurricane Milton.

Impact on the Catastrophe Bond Market

Despite the significant natural catastrophe activity in 2024, Swiss Re Capital Markets stated that the catastrophe bond market had not yet incurred direct losses from these events. However, further developments and additional erosion of aggregate structures could still lead to more claims over time.

Swiss Re reiterated that most of the recovery payments made in 2024 were related to events from prior years. The largest contributors to these payouts included:

• Hurricane Ian (2022)
• Hurricane Otis (2023)
• COVID-19-related losses
• The 2023 Turkey earthquake
• Winter Storm Elliott (2022)

Growth of the ILS Market

In addition to discussing catastrophe bond recoveries, Swiss Re also emphasized the growth of the insurance-linked securities (ILS) market. The firm noted that the ILS market expanded by 10.5% year-over-year, driven by increasing investor demand and a growing need for alternative risk transfer solutions.

Looking ahead, Swiss Re stated that the ILS market is on track to surpass $50 billion in outstanding notional value in the near future. This growth reflects the market’s increasing importance in providing reinsurance capacity and diversifying risk for insurers.