Over the course of 2024 there were a number of recoveries made under catastrophe bonds, however these were primarily driven by cat losses that occurred in prior years, in particular both hurricane’s Ian and Otis, according to Swiss Re Capital Markets, the investment banking and insurance-linked securities (ILS) division of reinsurance giant Swiss Re.
In a new report, Swiss Re explained that as events from previous years have continued to develop, the ILS market has continued to support the industry, as nearly $440 million of recovery payments made to sponsors were recorded throughout 2024, which clearly reflects the ILS market’s role in industry risk-sharing.
The main drivers of these are said to be Hurricane Ian, Hurricane Otis, and COVID-19, as well as the 2023 Turkey earthquake and Winter storm Elliott, Swiss Re explained.
Analysts from the firm also noted that these events have contributed to the erosion of the retention of many aggregate structures during the year.
As a reminder, you can view details of catastrophe bond recoveries in our directory of cat bonds facing losses or at-risk of loss.
Commenting on natural catastrophe activity in 2024, Swiss Re Capital Markets said, “2024 was marked by several significant natural catastrophes, from hurricanes and earthquakes to severe convective storms, wildfires and flood events. Those events have affected areas across the globe, resulting in a high financial cost and a tragic loss of life and livelihoods.
“While final impacts are still being assessed, in early December, Swiss Re Institute published a press release stating that insured losses from natural catastrophes in 2024 were on track to exceed USD 135 billion in 2024, passing the USD 100 billion threshold for the fifth consecutive year while economic losses from natural catastrophes were estimated to reach USD 310 billion.”
Adding: “Two-thirds of the estimate was attributable to severe weather conditions in the US, which was affected by a high frequency of severe thunderstorms and two major hurricanes, namely Hurricane Helene, followed two weeks later by Hurricane Milton.”
Swiss Re Capital Markets stated, “The cat bond market hasn’t incurred losses from 2024 events directly, pending further loss developments and/or any further erosion on aggregate structures. However, events from prior years have continued to develop and resulted in recovery payments to sponsors of about USD 440m. The main drivers of these being Hurricane Ian, Hurricane Otis, and Covid-19, as well as the 2023 Turkey earthquake and Winter storm Elliott.”
Furthermore, Swiss Re also highlighted that the ILS market has grown by 10.5% year-on-year, and is on track to exceed USD 50 billion of notional outstanding in the near future.
