2025 saw a long-standing pattern reverse within the catastrophe bond market, as diversifying risks began offering spreads comparable or higher than those of traditional peak perils, while valuations between index-linked and indemnity structures normalised, Florian Steiger, CEO of Icosa Investments AG highlighted in a recent report.
Steiger explained in the report that this combination has “created a broad set of opportunities and enables a level of differentiation between funds that has rarely been possible in recent years.”
“One of the most notable developments in the cat bond market in 2025 has been the shift in relative valuation between so-called peak perils and diversifying risks. Peak perils refer to the market’s core risks, most notably US hurricanes and US earthquakes, which historically account for the majority of insured loss potential and therefore command the highest risk premia. Diversifiers, by contrast, encompass all other perils, including European windstorms, Japanese typhoons and earthquakes, floods, wildfires, cyber risk, and other secondary perils,” Steiger explained.
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