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ILS and cat bonds pitched as resilience tool for climate adaptation
A Sage Advisory Services report says first half of 2026 natural catastrophes caused $111–$142 billion in losses, with only about $46–$47 billion insured, leaving a large protection gap.
Sage Advisory Services argues that insurance-linked securities and catastrophe bonds can support a shift from simply mitigating climate risk to building resilience. The fixed income and alternative solutions manager says the ILS and cat bond framework can allocate capital across regions and perils, helping close part of the resilience deficit as climate adaptation becomes a global priority.
In its report, Sage Advisory Services, authored by Bob Smith and Andrew Poreda, estimates that over the first half of 2026 global natural catastrophes generated about $111–$142 billion of economic losses, while only around $46–$47 billion was insured. It cites Aon estimates that roughly 57% of first-half losses were uninsured, and Gallagher Re estimates that 68% of the $142 billion losses were left uninsured.
The report also points to a broader gap in prior periods, saying Aon reported $260 billion of natural-catastrophe losses in 2025 and Swiss Re estimated a broader $424 billion protection gap. It warns that uninsured catastrophe losses can delay rebuilding, drive commercial interruptions, strain municipal budgets, disrupt essential services, reduce employment, and weaken long-term economic vitality.
Sage Advisory Services says cat bonds and ILS operate by allocating capital to help insurers, reinsurers, governments, and corporations transfer catastrophe risk, while investors generate returns through the same mechanism. The report also highlights that cat bonds and the ILS market have historically offered risk-adjusted returns with low correlation to equities and fixed income, because performance is driven primarily by insured-event risk rather than corporate earnings.