Artemis recently reported (link to article) that the catastrophe (cat) bond market has surged to a record $50 billion in outstanding issuance, reflecting several favorable market dynamics. The insurance-linked securities (ILS) market broadly, and cat bonds more specifically, have solidified their role as a critical risk transfer tool, offering competitive pricing for sponsors and attractive returns for investors.
This growth is fueled by several key factors. First, 2023 was the highest-returning year for ILS strategies, outperforming most investment classes and drawing fresh capital into the market. Additionally, strong performance metrics, a lack of significant catastrophe events since Hurricane Ian, and favorable pricing relative to traditional reinsurance have created a “Goldilocks” environment. Sponsors who had previously hesitated to tap the cat bond market are now entering, spurred by institutional adoption and a growing peer group using the structure.
Beyond performance, macroeconomic uncertainty and inflationary pressures have further highlighted the appeal of ILS as a non-correlated asset class. Unlike many investment categories affected by geopolitical volatility, fluctuating interest rates, and broader economic swings, cat bonds remain largely insulated, offering stability in an unpredictable financial landscape.
Competitive Dynamics
The evolution of the ILS market isn’t just about scale – It’s also about how new entrants and changing sponsor behavior are reshaping the space. In addition to traditional ILS participants, more capital is entering the sector opportunistically, with investors looking beyond cat bonds to sidecars, collateralized reinsurance and other structured solutions.
Against this backdrop, Howden Capital Markets & Advisory (HCMA) has rapidly emerged as a leader, capturing 25% of all cat bond issuances year-to-date and growing by 500% since 2021. Unlike firms that focus primarily on existing sponsors, HCMA has actively expanded the market by bringing new issuers into the space, driving innovation, and strengthening investor participation.
Central to this growth is HCMA’s unique approach and capabilities:
- Holistic Investment Banking Approach: HCMA applies a strategic advisory model, helping sponsors navigate market complexities and optimize capital structures through one of the largest global P&C investment banking platforms.
- Dedicated Capital Raising Expertise: A specialized capital raising team engages directly with institutional investors, maximizing liquidity, demand, and participation in HCMA-led transactions.
- Cross-Functional Collaboration: By integrating Howden Re’s risk advisory, brokerage, analytics, and ILS expertise, HCMA offers a seamless, client-centric experience.
Case study: Kin Sponsored Hestia Re Ltd. (Series 2025-1) Notes
On 6 March 2025 Kin Interinsurance Network successfully closed its third and largest 144A Cat Bond issuance through Hestia Re Ltd, with HCMA acting as the sole structuring agent and bookrunner, advising on structuring considerations and marketing strategy. The transaction provides per occurrence, indemnity coverage for Florida Named Storm events, with Class A Notes having an expected loss of 1.72% and final pricing of 6.75%, and Class B Notes having an expected loss of 2.34% and final pricing of 8.25%.
Mitchell Rosenberg, Co-Head of Global ILS at Howden Capital Markets & Advisory commented: “The substantial upsizing and favorable pricing of this transaction highlight the ILS markets strong appetite for supporting innovative and top performing insurers like the Kin reciprocals, that continue to demonstrate model outperformance, transparent communication, and a proven track record in underwriting and claims. We’re proud to have helped Kin Interinsurance Network achieve these exceptional terms, which represent a significant improvement over previous issuances.”
Looking Ahead
The ILS market, inclusive of both cat bonds and sidecars, is poised for continued expansion, with structural shifts supporting long-term growth. As more sponsors seek alternative capital and investors remain drawn to the sector’s strong and diversifying returns, ILS will play an even greater role in the global reinsurance capital stack.
With its dynamic and growth-oriented approach, Howden is well-positioned to drive the next phase of market development. By combining deep investor relationships, innovative structuring capabilities, and an integrated service model, HCMA and Howden Re are shaping the future of ILS and reinforcing their position as leaders in this evolving space.
