The European Fund and Asset Management Association (EFAMA) has published a report on catastrophe bonds in UCITS portfolios. The European Commission is considering a review of the UCITS Eligible Assets Directive.
The catastrophe bond market has grown steadily and reached USD 65.6 billion outstanding in 2026, EFAMA said. Twenty UCITS funds focused on these bonds manage around USD 21 billion, almost one-third of the market.
The report says catastrophe bonds can diversify portfolios because their risk drivers differ from those of equities and corporate bonds. The European Securities and Markets Authority found correlations of 0.19–0.29 with the major asset classes it examined.
Catastrophe bonds have an established secondary market and can be traded daily, although investors commonly buy and hold them. Estimated annual secondary-market turnover is 23%, compared with 33% for European investment-grade corporate bonds and 19% for high-yield bonds. Average maturities are around three years.
Industry estimates suggest that direct retail investors account for only around 1% of the investor base in catastrophe bond UCITS. EFAMA also says that only around 25% of catastrophe losses in Europe are privately insured, and that these bonds add insurance capacity by transferring risks to capital-market investors.
EFAMA says any changes to eligible-asset rules should preserve the global standing of the UCITS label and allow controlled, limited exposure to assets uncorrelated with financial markets. Federico Cupelli, EFAMA’s Deputy Director of Regulatory Policy, said the current framework is effective and should remain in place.
