The co-founder of Fermat Capital Management says the market for catastrophe bonds is drawing in new issuers at a rate that’s unlike anything he’s seen before.John Seo, managing director and co-founder of Connecticut-based Fermat — a hedge fund manager specialized in cat bonds — says he’s aware of 16 new issuers coming to market in 2025. That’s as much as eight times the historical average for first-time issuers, Seo said. He expects cat bond sales of about $24 billion this year, testing last year’s record. ...

Core Viewpoint - Haymarket Insurance Co. has filed a fraud complaint against Leadenhall Capital Partners, highlighting significant financial troubles and losses faced by Leadenhall in its dealings with 777 Partners [1][2]. Group 1: Company Background - Leadenhall Capital Partners is a London-based private equity firm specializing in insurance-linked investments, including catastrophe bonds and private credit [3]. - Founded in 2008, Leadenhall operates as a joint venture with Japan's MS&AD insurance group and holds regulatory registrations in the UK, the U.S., and Bermuda [4]. Group 2: Financial Issues - By late 2022, Leadenhall was experiencing mounting losses beyond its relationship with 777 Partners, leading to increased investor concern and destabilization of its capital base [2]. - The complaint indicates that Leadenhall had approximately $650 million in exposure across four non-777 platforms, which were misrepresented as stable but subsequently faced bankruptcy or regulatory issues [5]. Group 3: Major Problem Assets - Significant problem assets included RMIT and Reverse Mortgage Funding, with Leadenhall claiming over $230 million in secured positions before federal seizure; Friday Health Plans, with about $200 million exposure, was liquidated; and Hi.Q, with roughly $75 million exposure, entered Chapter 7 [6]. - RMIT filed for Chapter 11 in late 2022, facing liquidity pressures and disputes over financing, leading to a prolonged and costly wind-down process [7].

Core Insights - Alternative investment managers are increasingly interested in catastrophe bonds linked to wildfire risks, a sector previously deemed too complex to model [1][3] Catastrophe Bonds Market Overview - Over $5 billion in catastrophe bonds with wildfire exposure were issued in 2025, more than double the amount from 2024, which had seen only individual bond sales in the tens of millions [2] - The overall issuance of catastrophe bonds reached a record $23 billion in 2025, with projections indicating the total market could end the year around $60 billion [3] Investor Sentiment and Market Dynamics - Improved modeling techniques have shifted investor sentiment towards wildfire risks, encouraging fund managers to explore this previously "untouchable" risk category [3][10] - The California FAIR Plan Association issued a debut wildfire cat bond, raising $750 million, which is the largest pure wildfire cat bond to date [8] Regional Developments - Other regions, such as Colorado and Europe, are considering the use of catastrophe bonds to manage increasing wildfire risks [9] Risk Modeling and Pricing - Advances in modeling, including the use of artificial intelligence, have led to more reliable loss estimates for wildfire risks, resulting in better pricing and broader investor participation [10] - Wildfire cat bonds currently have risk premiums six to eight times higher than traditional bonds based on more understood risks, such as hurricanes [11] Market Performance and Future Outlook - The Swiss Re Global Cat Bond Performance Index increased by approximately 11% in 2025, outperforming other bond indices [14] - Primary issuance of catastrophe bonds is expected to be strong in 2026, driven by lower spreads and the reinsurance market's push to transfer additional risks to capital markets [16]

Core Insights - The rise of catastrophe bonds is impacting the market share of reinsurers, with primary insurers increasingly relying on these bonds instead of traditional reinsurance [1][2] - The market for catastrophe bonds has grown significantly, with estimates indicating a growth of over 50% to $55 billion since 2023 [3] - Reinsurers are experiencing pressure on their rates due to the shift towards capital markets for risk transfer, leading to price corrections and diminished market dominance [6] Market Dynamics - Primary insurers now sponsor 58% of all catastrophe bonds, up from 48% two years ago, indicating a shift in reliance from reinsurers [1] - Reinsurers remain dominant but are losing market share to alternative investment managers seeking higher returns [2] - The increasing reliance on capital markets coincides with rising costs from natural catastrophes, with industry losses expected to exceed $150 billion this year [3] Catastrophe Bonds Performance - Catastrophe bonds can yield significant returns if no catastrophic event occurs, as evidenced by the Swiss Re Global Cat Bond Performance Index, which gained about 10% this year [4][5] - The issuance of catastrophe bonds has reached record levels, with projections for continued growth into 2025 [5] Reinsurers' Response - Some reinsurers are adapting by increasing their involvement in the catastrophe bond market, both as issuers and investment managers [7] - Swiss Re emphasizes the importance of capital market instruments as complementary to traditional reinsurance, aiming to provide effective risk transfer solutions [8]