Euler ILS Partners
Catastrophe bond yields indicate pricing normalisation
Euler ILS Partners reports that catastrophe bond market yields have declined over the last two years. The specialist Swiss insurance-linked securities investment manager believes this is a normalisation, or a return to more historically normal pricing, rather than a structural shift in demand.
Market Expansion
The catastrophe bond market continued to expand through the second-quarter of 2026. Euler ILS Partners notes that the number of outstanding deals rose, which highlights sustained sponsor activity and robust investor demand across the market.
The investment manager stated that primary market pricing moderated from the peak levels observed in 2023 and 2024. Together with easing collateral yields, the overall USD return potential declined from its peak, reflecting a broader normalisation of market conditions.
Market Metrics
Euler ILS Partners publishes quarterly insights into the catastrophe bond market. As of the end of the second-quarter of 2026, the average coupon of the outstanding stock of catastrophe bonds sat at 7.12%, down around 10.5% year-on-year. The average yield to maturity of the catastrophe bond market, excluding the collateral return, stood at 5.98% as of June 30th 2026.
| Metric | Q1 2026 | Q2 2026 | Year-on-Year Change |
|---|---|---|---|
| Average Coupon | 7.56% | 7.12% | -10.5% |
| Average Yield to Maturity | 5.86% | 5.98% | -21.4% |
| Average Expected Loss | 2.29% | 2.31% | - |
Performance and Peril Composition
Euler ILS Partners said that Cat Bonds delivered positive performance in early 2026, with the Plenum Cat Bond UCITS Fund Index recording a return of 3.16% year-to-date as of the end of June. The average annual realised market loss amounted to 0.84%, which compares favourably to the modelled expected loss for the overall market.
The peril composition of the catastrophe bond market after the second-quarter shows that US hurricane risk accounts for around 75% of exposure, up from 74% as of the end of Q1. Pure US hurricane exposed cat bonds shrank slightly to 31% over Q2, from 33.3% of exposure at March 31st. But the US hurricane exposed multi-peril cat bond component of the market increased to 43% from 41% over the quarter.
According to Euler ILS Partners, secondary market yields declined from their recent highs but remain above long-term historical averages, indicating a pricing normalisation rather than a structural shift in demand. The average expected loss of the cat bond market only rose slightly from 2.29% at the end of Q1 2026 to 2.31% by the end of the second-quarter.
