Archive · 11 Aug 2026
Record $65.6 billion catastrophe bonds shift disaster risk to investors
Some people worry about storms, earthquakes and fires because they can damage homes, roads and whole cities.
Insurance companies help pay for that damage, but the costs can be so huge that one company alone cannot handle them.
So insurance companies came up with an idea called a 'catastrophe bond.'
Investors give money up front, and in return they earn extra money if no big disaster happens.
If a big disaster does happen, the investors' money is used to pay for repairs instead.
It is a bit like betting that a big disaster will not strike.
Investors like this because it can earn them money even when stock markets are doing something different.
In the year to June 2026, a record $65.6 billion worth of these bonds were sold.
New places, such as the Kyrgyz Republic and Tajikistan, are now using them to protect against earthquakes and floods.
India does not have any yet, but the state of Kerala has asked the national government to think about using them.
Insurers issued a record $65.6 billion in catastrophe bonds in the year to June 2026.
Catastrophe bonds pay investors high interest, but their principal can be used to cover disaster claims if losses cross a pre-agreed threshold.
Morningstar found catastrophe bond and insurance-linked securities funds pulled in $10.2 billion in new money over the past three years.
The Asian Development Bank issued its first-ever catastrophe bonds, worth $160 million, in May 2026 to protect the Kyrgyz Republic and Tajikistan.
Wildfire-linked catastrophe bonds are the fastest-growing market segment, with issuance topping $5 billion this year alone.
- Who
- Insurers, reinsurers and governments issue catastrophe bonds, while institutional investors such as pension funds, hedge funds, sovereign wealth funds and specialist ILS managers buy them. The Asian Development Bank issued its first cat bonds, and Kerala has asked India's central government to consider them.
- What
- A record $65.6 billion in catastrophe bonds was issued in the year to June 2026, shifting natural disaster risk from insurers to capital markets.
- When
- In the year to June 2026; the Asian Development Bank's first-ever cat bonds were issued in May 2026.
- Where
- The US, especially California and Florida, remains the dominant market; the market is expanding to the Kyrgyz Republic and Tajikistan, and India's Kerala is considering it.
- Why
- Mounting losses from hurricanes, wildfires and other natural disasters are pushing insurers to shift risk to capital markets, while investors seek high returns that do not move with stock or bond markets.
- Record issuance
- $65.6 billion in the year to June 2026
- New fund inflows
- $10.2 billion over the past three years (Morningstar)
- Hurricane Andrew damage
- $27 billion (1992)
- First cat bonds created
- 1997, following Hurricane Andrew
- ADB first cat bonds
- $160 million, issued May 2026 (ADB Vice-President Roberta Casali)
- Wildfire cat bond issuance
- Over $5 billion in the current year
- Typical bond term
- Three to five years
- Kerala budget request
- Catastrophe bonds under consideration for Union Budget 2026-27