Catastrophe bond issuance showed a stable to slightly stronger trend in the third quarter. An Artemis report analysis shows that in the third quarter of 2025, catastrophe bonds and related insurance-linked securities (ILS) issuance reached $1.036 billion, above average, bringing the total issuance for the year to $18.6 billion, exceeding last year's total of $17.7 billion, and suggesting that this year is likely to break the $20 billion mark for the first time.

Catastrophe bond funds continued their strong performance in September, achieving the strongest September return for this type of fund. For example, the Plenum Cat Bond UCITS Fund Index achieved a monthly return of 1.38% in September, and a year-to-date return of 7.25% (as of September 26).

The main drivers of the recent price increase in catastrophe bonds include:

A relatively calm Atlantic hurricane season has driven narrower spreads. This is only the second time since 1950 that no named storms have formed in the Atlantic region between August 29 and September 16 (the first being in 1992).

Capital inflows are driving demand, and high buying pressure coupled with scarce trading volume is fueling price increases.

Barring major loss events, year-end spreads are expected to narrow further. The catastrophe bond market is poised for its third consecutive year of double-digit returns in 2025.

For investors holding to maturity, the insurance risk premium rose rapidly in 2022-2024 following Hurricane Ian. Although it subsequently contracted, US Treasury yields remain high compared to pre-Hurricane Ian levels (money market funds still offer returns exceeding 4%), supporting bond returns.

Catastrophe bond yields over the next two years will be supported by the high interest rates of newly issued catastrophe bonds in 2023-2024.

Catastrophe bond spreads remain attractive compared to other fixed-income assets (such as high-yield bonds).

Risk Warning: Although the historical peak has passed, strong hurricanes may still occur in October and November. Investors are advised to monitor developments towards the end of the hurricane season and be wary of valuation restructuring caused by expectation corrections.