Best’s Market Segment Report: Record Catastrophe Bond Issuance Boosts ILS Capacity and Reshapes Pricing Landscape

OLDWICK, N.J.--(BUSINESS WIRE)--
Reinsurance pricing at the midyear 2025 renewals was the most favorable pricing for cedents in recent years, indicating that competition among capacity providers has intensified, according to a new AM Best report. In addition, record-breaking issuance of 144A property catastrophe bonds has expanded avenues by which investors can participate, facilitating growth in capacity.

The Best’s Market Segment Report, “Record CAT Bond Issuance Boosts ILS Capacity and Reshapes Pricing Landscape,” is part of AM Best’s look at the global reinsurance industry ahead of the Rendez-Vous de Septembre in Monte Carlo. Other reports, including AM Best’s ranking of top global reinsurance groups and in-depth looks at the Lloyd’s, life/annuity, health and regional reinsurance markets, will be available during August and September.

According to this report, property catastrophe reinsurance pricing at the June 2025 renewals fell by approximately 10% in general on a risk-adjusted basis, which marks a departure from the across-the-board rate increases seen two years ago. However, renewal pricing was not uniform across all layers of reinsurance towers. While rate reductions were closer to high single digits on average at the upper layers, lower layers experienced flat to modest reductions. Additionally, the number of new startup insurers in Florida and continued depopulation of the state-run Citizens Property Insurance have been driving additional demand, especially at lower layers of risk.

The record catastrophe bond issuance in the first half of 2025 was accompanied by various notable deal issuances and new sponsors. The report notes that small- to mid-sized insurers have been turning to the capital markets and sponsoring catastrophe bonds. “The capital markets allow these insurers access to a broad range of investors, and the insurers in turn can get fully collateralized multi-year reinsurance,” said Emmanuel Modu, managing director, AM Best.

ILS market returns started on a weaker footing in 2025, largely driven by the January wildfires in California. Monthly returns swung back to positive in February through June but were lower in magnitude than in the same months in 2024. “Full-year 2025 cat bond market returns are unlikely to match the levels observed in 2024; however, spread levels on the in-force deals and current levels of collateral yield suggest the 2025 return will be higher than the average observed from 2017 to 2022,” said Wai Tang, senior director, AM Best.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=357065.

For global reinsurance reports ahead of Rendez-Vous de Septembre, as well as video coverage of the event, please visit AM Best’s Reinsurance Information center.

Lastly, AM Best will host its annual reinsurance market briefing at Rendez-Vous de Septembre on Sept. 7, 2025, at 10:15 a.m. (CEST) in Monte Carlo. For more information, please visit the event website.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2025 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Emmanuel Modu

Managing Director, Insurance-Linked Securities

+1 908 882 2128

emmanuel.modu@ambest.com

Christopher Sharkey
Associate Director, Public Relations

+1 908 882 2310

christopher.sharkey@ambest.com

Wai Tang
Senior Director, Insurance-Linked Securities

+1 908 882 2388

wai.tang@ambest.com

Al Slavin
Senior Public Relations Specialist

+1 908 882 2318

al.slavin@ambest.com

Source: AM Best