The secondary market for catastrophe bonds witnessed a significant upswing during the initial six months of 2026. This revival was primarily fueled by an influx of new and existing market players eager to acquire bonds, rather than divest their current holdings. This robust demand propelled secondary market activity to considerably higher levels, following a period of relative calm in 2025, a trend underscored by insights from Swiss Re Capital Markets.
Swiss Re Capital Markets' latest report on insurance-linked securities (ILS) indicates that trading activity, as measured by TRACE data, reached a total of 806 transactions by June 2026. This figure represents a substantial increase of approximately 37.5% when compared to the first half of 2025.
This heightened engagement became particularly apparent starting in March, with TRACE volumes climbing to 148 trades that month, and further escalating to 198 trades in May. According to the report, May 2026 marked the most active month for the secondary market since March 2020. A particularly dynamic week in mid-May saw 129 distinct catastrophe bonds, representing about a third of all outstanding catastrophe bond classes, change hands, albeit generally in smaller quantities, as reported on TRACE. This surge in transactions highlights the growing liquidity and maturity within the secondary cat bond market.
The report also delves into the trends observed in seasonally adjusted secondary spreads across various catastrophe bond categories. Data shows that US Wind bond spreads continued their tightening trajectory, a trend heavily observed throughout much of 2025. This was influenced by persistent investor interest and minimal loss events affecting existing bonds. In contrast, US Earthquake spreads saw an increase during the first half of 2026, while Industry Loss spreads remained relatively stable. Swiss Re Capital Markets noted that overall spread movements among these three types of catastrophe bonds have become more moderate compared to the more pronounced fluctuations experienced after Hurricane Ian.
Furthermore, Swiss Re Capital Markets offered insights into the overall performance of the catastrophe bond market during the first half of 2026. Despite ongoing global financial market volatility, including geopolitical tensions, evolving trade policies, and increased fluctuations in traditional asset classes, the catastrophe bond market continued to demonstrate its low correlation with broader financial markets and other alternative investment options. As a result, the Swiss Re Global Catastrophe Bond Index (SRGLTRR) delivered a respectable return of 4.12% over this period. The firm concluded that weighted average spreads continued to narrow, reflecting strong investor demand and a well-capitalized market. Simultaneously, elevated money market rates provided significant support to all-in yields, maintaining their attractiveness relative to the lower rates seen in prior years.
The first half of 2026 heralded a robust recovery in secondary catastrophe bond trading, driven by an enthusiastic buyer base. Swiss Re Capital Markets' analysis reveals a notable uptick in transaction volumes, signifying enhanced market liquidity and a maturing landscape for these financial instruments. Despite wider global economic uncertainties, cat bonds continued to exhibit resilience and low correlation with traditional assets, underscoring their enduring appeal to investors seeking diversified portfolios and attractive yields.
