European Fund and Asset Management Association backs retaining catastrophe bond eligibility in UCITS review

The European Fund and Asset Management Association (EFAMA) published a report supporting continued access to catastrophe bonds in UCITS portfolios as the European Commission considers reviewing the UCITS Eligible Assets Directive. EFAMA argues that the current framework should remain in place, preserving controlled, limited exposure to assets whose risks differ from those of traditional financial investments while maintaining the UCITS label’s global credibility. The catastrophe bond market reached USD 65.6 billion outstanding in 2026, with 21 UCITS managing around USD 21 billion, almost one-third of the total. The bonds provide diversification through exposure to insurance risks rather than the drivers 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. An established secondary market permits daily trading, although holding bonds to maturity is common. Estimated annual turnover is 23%, compared with 33% for European investment grade corporate bonds and 19% for their high yield counterparts. Catastrophe bond UCITS are used mainly through professional and intermediated channels, with direct retail investors accounting for around 1% of the investor base, according to industry estimates. UCITS access can serve investors whose mandates restrict other fund structures. By transferring catastrophe risks to capital market investors, the bonds also add insurance capacity. The Commission estimates that only around 25% of catastrophe losses in Europe are privately insured.