Aon has reported that catastrophe bond issuance surpassed $21 bn during the 12 months ending June 30, 2025, marking the most active year in the history of the insurance-linked securities (ILS) market.
At the same time, sidecar capacity expanded to $17 bn across property and casualty lines, according to the 19th ILS Annual Report.
Total outstanding cat bond volume rose to $55 bn by the end of the period, up 19% from June 2024.
The report said the first half of 2025 alone accounted for $17 bn of issuance across 56 transactions, matching full-year 2024 volumes within six months. Average deal sizes climbed to $302 mn, a 12% increase compared with H2 2024.
The ILS market as a whole also set records, with alternative capital reaching $121 bn by mid-2025. Sidecar growth accelerated on the back of strong margins and the emergence of casualty-focused structures, which now make up around 8% of the market.
Investor performance remained strong. The Aon Securities Catastrophe Bond Total Return Index showed a 14.1% return over the review period, despite losses tied to Hurricanes Beryl, Helene, and Milton and severe California wildfires.
Aon said the manageable impact confirmed the relative remoteness of ILS instruments.
Three trends shaped the cat bond market. Insurer participation rose to 58% of issuance, fueled by higher capital requirements and demand for multi-year protection.
Regional concentration sharpened, with 93% of new transactions covering North American perils. Florida exposure grew to $5 bn, representing 16.6% of outstanding cat bonds and a 46% jump from the prior year, reflecting investor appetite for peak-zone risk.
Driven by higher building costs, evolving weather trends and the push to close the protection gap, cedents are increasingly seeking coverage beyond what is available in the traditional reinsurance market
Richard Pennay, CEO of Aon Securities
“With the uncorrelated nature of catastrophe bonds, and investors achieving double-digit returns, the space continues to demonstrate its value and outpace growth in other areas of the insurance industry,” said Richard Pennay.
Capital recycled efficiently, with $12.9 bn of maturities re-entering the market. Repeat sponsors accounted for most issuance, joined by 13 new entrants, lifting the client base to a record level.
