Catastrophe Bond Yields Soar as Disasters Abound and Rates Rise

Investors in the $35 billion catastrophe bond market are demanding the highest premiums in years to cover issuers against disasters, as weather events become more extreme while interest rates rise.

Margins on new issuances of catastrophe bonds covering US wind events are now at the highest since 2019, at 5.3%, according to a report from reinsurance broker Gallagher Re. For other risks the premiums offered are at the highest since at least 2017.

The rise in margins comes after disasters including Hurricane Ian — the costliest storm for insurers since Katrina — saddled catastrophe bond holders with losses last ...