Catastrophe Bonds’ Huge Market Gains Put Reinsurers on Backfoot

The seemingly unstoppable rise of catastrophe bonds may now be eroding the market share of reinsurers.

After years of raising prices, reinsurers are finding that primary insurers have started relying less on them and more on a niche bond market designed as a backstop for only the most extreme disaster scenarios. According to estimates provided by Barclays Research, primary insurers now sponsor 58% of all cat bonds, up from 48% two years ago.

The upshot is that reinsurers face new market dynamics, with catastrophe bonds appearing to play an “important” role in that shift, said Ivan Bokhmat, European ...