Commingling of Risks: The New Flavour of the Cat Bond Market

In recent years, cat bond issuance volume has routinely featured multiperil structures, bundling various regional natural perils under single or composite triggers.

Recognising this trend, Adderley said, “More sponsors are now blending different risks within single coverages. Where we once saw mostly pure property cat deals, sponsors are increasingly combining property cat with cyber or specialty lines. Rather than introducing entirely new perils, this commingling of risks seems to be the new flavour of the ILS market.”

Another growing topic that’s emerged across the re/insurance industry has been how impactful the global data centre build-out will be for the industry, with many industry figures indicating that the ILS market could play a key role as this market continues to grow.

Addressing this, Adderley said, “These data centres are going to cost billions and billions, and nobody is going to take on that whole risk alone. Reinsurers will want to slice and dice the risk with other reinsurers. Given that ILS are fully collateralized, the question is how much managers are willing to take on. We could see ILS only taking a small portion of the risk.

“On a leverage basis, traditional reinsurers can take on more risk thanILS. Will ILS play a part in the build-out? Yes. Can they take on the whole load? No, because I doubt companies will have 100% reinsurance or insurance coverage against the total value.”

Adderley continued: “While ILS firms might cover up to 50% of the protection, the overall exposure is simply too large to be subsumed by the ILS market alone. ILS will play a part, but it can’t carry the whole load.

“Data centres will clearly be a key market driver moving forward, though it remains uncertain when they will fully impact the ILS space.”

Over the past decade, Q3 cat bond issuance has averaged $848 million. With Q3’26 delivering $948 million, we asked Adderley whether an above average Q3 indicates that 2026 will see a strong end to the year for issuance?

“We have way more deals coming to us from different clients, and we have not seen a slowdown.”

“September has come to an end, and I think we will see plenty of new deals being announced and completed. There are always some deals announced in November, too. But, if you don’t hear about them in October, they don’t really have much of a chance to get completed before yearend,” Adderley explained.

“Considering all of this, I don’t see why Q4 won’t have the same amount of deals as it did last year,” he added.

To end, Adderley highlighted that whilst casualty sidecars are gaining more traction, the level of discussion doesn’t appear to match up with the number of transactions that are actually being completed.

“Last year, I was involved in four or five casualty sidecars, and of that, only two ultimately came to market. While casualty sidecars remain a popular topic of discussion, actual transaction activity has yet to match the level of market interest,” Adderley said.

“Perhaps there are a number of reasons why these casualty sidecars are not all being completed. They are difficult to close, they are time-consuming to execute, and they’re plagued by uncertainty surrounding the level of tail risk that goes into them,” Adderley concluded.

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First Published In Artemis, October 2026