Catastrophe Bond Sales Rise

Reports within the financial press indicate a surge in underwriters selling catastrophe bonds during 2025 as they seek to transfer natural catastrophe risks.

Via the mechanism of securitisation, risk can be transferred from the traditional insurance or reinsurance markets to the capital markets.

Assets, such as underwriting portfolios, which are capable of providing income over a period of time represent an income stream. Securitisation enables such income- generating assets to be converted into risk-assuming capacity.

Securitisation is the process by which the right to receive a share of the income stream is packaged and converted into securities to be sold to investors. The process is often

channelled through a special purpose vehicle company incorporated specifically for the

purpose of such securitisation.

Insurance-linked securities were first developed in the early 1990’s following Hurricane

Andrew and the Northridge earthquake in America. Since then, there has been a steady

increase in the issuance of catastrophe bonds.

Industry data suggests that the issuance of catastrophe-linked securities has risen from

approximately US$ 2.8 billion in 2003 to US$ 17.7 billion in 2024. Whereas the figure for

2025, up until mid-July, is estimated to already be at US$ 18.1 billion.

The rise in risk transfer, from traditional underwriting markets to capital markets (via

insurance-linked securities such as catastrophe bonds), has been linked to the increased

risk of extreme weather events impacting upon multiple risk categories.

So far as the oil & gas industry is concerned, events over the past 25 years have shown that infrastructure, both upstream and downstream, is not immune to the affects of extreme weather events such as hurricanes.