Capacity in the insurance linked securities (ILS) markets reached a record $107bn in 2024, with the sector avoiding the worst US hurricane losses because it typically doesn’t cover risks linked to Severe Convective Storms (SCS), according to a joint report by AM Best and Guy Carpenter.
Last year saw the return of US hurricanes following a relatively benign 2024, with Hurricanes Helene and Milton causing insured losses up to $50bn as part of global Nat Cat loss figure of $135bn for the year – well above the ten year average of $98bn.
ILS capacity grew during 2024 reaching a record $107bn by year end, according to Guy Carpenter and AM Best data, and the ratings agency said in a report the sector was helped by two years in which it hasn’t incurred material losses.
By year-end 2024, capacity in the 144A natural catastrophe bond market hit more than $45bn.
“As testament to the de-risking actions of the past few years, the ILS market performed well despite another year of heavy cat losses in 2024.
Cat bonds performed strongly again because they generally cover more remote layers of risk that are insulated from SCS losses, although some outstanding aggregate bonds are exposed to that peril. However, only a few bonds thus far have been reported as being potentially impacted by Milton or Helene,” AM Best said.
The 144A nat cat bond sector had another record breaking year in 2024 with total issuance of $16.6bn eclipsing the previous record of $15bn set in 2023.
The 2023 number marked a rebound for the sector after issuance fell back to $9.4bn 12 months earlier following a record $16.4bn of issuance in 2020.
According to the rating agency over $12bn worth of outstanding bonds were scheduled to mature in 2024 which provided additional capital for the sector as it was redeployed into the market.
AM Best said roughly 55% of sponsors with a cat bond maturing in 2024 were also planning another issuance in the same year, adding up to $11bn of total capacity.
Another $1.7bn came from eleven new sponsors while the balance of $3.9bn was attributable from returning sponsors which did not have a cat bond maturing in 2024.
“Other drivers of the record issuance include robust demand for capacity by cedents and investors that have been willing to deploy more capital to the segment because they are pleased with the returns and pricing,” AM Best said.
Cat bond returns
AM Best said that the ILS market posted stellar returns again in 2024, with the Swiss Re Global Cat Bond Index returning 17.3% and the ILS Advisors Index, 13.1% – slightly below the record levels posted in 2023.
The ratings agency said that strong spread levels in 2023 and 2024 issuances have fueled solid returns and that spread tightening over the course of 2024 boosted the mark-to-market price returns of outstanding cat bonds in the secondary market.
Interest rates on the underlying collateral also remained elevated in 2024 compared to pre- pandemic levels – on 18 March 2025 a 10 year US Treasury bond yielded $4.290 versus 0.72% on the same date five years earlier.
AM Best said it expected rates to remain elevated, benefiting the ILS sector.
“In the US, favorable labor market reports and inflation persistently above the Federal Reserve’s target may slow the pace of further cuts to short-term interest rates, allowing the underlying collateral to continue to make substantial contributions to returns,” AM Best said.
AM Best said there is a growing interest in using parametric triggers linked to cat bonds, which it said was still ‘modest’ with most primary insurer sponsors showing a strong preference for indemnity covers.
While in the broader reinsurance market, the greater availability of capacity in 2024 over 2023 meant that indemnity cover was more attainable – despite these factors, issuance of 144A parametric cat bonds grew to $1.4bn in 2024, from $600m in 2023, and AM Best expects this trend to continue.
“The ILS market has seen further momentum for parametric covers. Parametric covers are likely to be used when indemnity cover is not widely available or simply doesn’t fit the needs of the cedent. Cedents have had a more difficult time placing aggregate cover for frequency-driven risks and are increasingly interested in parametrics as a solution,” it said.
AM Best also said there was increasing activity in the cyber ILS market in 2024, with Beazley issuing two more iterations of its Polestar Re bonds (Series 2024-2, 2024-3) for total of $370m, which brought the outstanding size of the 144A cyber cat bond market to nearly $800m at year-end 2024.
“The outstanding cyber cat bonds appear to have emerged unscathed from the CrowdStrike incident, which serves as a useful point of discussion to home in on precisely which exposures are covered and, in this case, to what extent accidental, non-malicious cyber incidents are covered,” AM Best said.
