With the insurance-linked securities (ILS) space continuing to gain significant momentum, reinsurance giant Swiss Re and GAM Investments have affirmed their commitment to continue developing new products and identifying opportunities within the ILS market.
In a recently published report, both firms said, “On the business development side, we remain committed to continuously developing new product ideas and identifying opportunities within the ILS domain to further expand our platform and aim to deliver profitable investment solutions for our clients.
“ILS managers such as ourselves, who have the ability to access a broad range of perils in a changing risk landscape, are at an advantage as they can better capture potential opportunities for enhanced risk-adjusted returns and diversification.”
Focusing on the catastrophe bond market, which has had a substantial 2025 with 144A cat bond issuance reaching and exceeding the $20 billion landmark, Swiss Re and GAM explained that the market continues to offer an attractive risk–return proposition for investors.
“The elevated spreads observed in 2023–2024 primarily reflected the repricing that followed Hurricane Ian and the subsequent increase in risk premia across the insurance market. This repricing phase, which historically follows large industry loss events, typically results in improved market discipline, enhanced structural terms, and higher-quality risk selection,” the report reads.
“While spreads have since moderated, cat bonds continue to exhibit characteristics that remain highly attractive – including low volatility, short duration and minimal counterparty exposure. Beyond their well-established low correlation to traditional asset classes, cat bonds offer a combination of attributes that are increasingly rare in today’s fixed income landscape.”
Both firms emphasise that even after the strong rally of recent years, catastrophe bonds continue to deliver compelling, uncorrelated income with an attractive risk-adjusted return profile relative to other segments of the fixed income market.
Reflecting on lessons learned throughout 2025, Swiss Re and GAM acknowledged that secondary perils required increased precision and caution within the cat bond market.
“Enhanced caution is warranted when investing in bonds exposed to secondary perils, including wildfire risk, as evidenced again in 2025. In the case of wildfires, even when events appear deterministic – particularly those driven by human activity where liable entities can be identified – ultimate loss outcomes often remain uncertain due to lengthy and unpredictable subrogation processes, in which insurers seek recovery from responsible third parties,” the report reads.
The wildfire peril has grown considerably throughout 2025, and wildfire cat bonds are anticipated to persist as a permanent and growing feature of the cat bond market going forward.
At the same time, Swiss Re and GAM noted that secondary perils, including flooding and severe convective storms (SCS), demonstrate greater model variability and data sensitivity compared to peak perils like US hurricanes. This results in increased model uncertainty, which requires a cautious approach.
Both firms also added, “Unless sufficient additional risk premium is provided by the secondary peril exposure, we deliberately concentrate on the latter category of risks, where model sophistication and empirical experience provide greater reliability.”
Moving forward, Swiss Re and GAM highlighted how the ILS market is continuing to both grow and expand into emerging lines of business such as cyber insurance, casualty, life and health, and parametric solutions.
“The development of these subsegments and the overall expansion of ILS could offer managers and investors significant potential for scalable and profitable growth. From a fund management point of view, 2026 will remain a year of disciplined, meticulous management and active trading for our cat bond strategy,” the report added.
“From a fund management point of view, 2026 will remain a year of disciplined, meticulous management and active trading for our cat bond strategy.”
