A Banner Year for Catastrophe Bonds

In February, five months after Hurricane Helene devastated parts of Appalachia, the North Carolina Insurance Underwriting Association (NCIUA) successfully priced a $600 million catastrophe bond that incentivized pre-disaster risk reduction measures.

A first for such transactions after several earlier attempts had failed, the resilience feature stood out amid a booming year, and broke new ground, in the cat bond and insurance-linked securities (ILS) market. As of September 20, according to Artemis, this year’s total issuance of $18.6 billion had surpassed the $17.7 billion for all of 2024, and the $56.2 billion outstanding topped the $50 billion at the end of 2024, according to Artemis’ dashboard.

The NCIUA-sponsored Cape Lookout Re transaction, facilitated by Hanover Re and structured by GS Securities, provides NCIUA and its policyholders with three years of indemnity-based protection for named storm losses. A “resilience trigger” requires investors to pay the issuer an interest spread of 0.35% plus interest into an account if aggregate losses remain below 60% of the attachment point for the notes, helping the insurer to fund...