Wildfire bonds: the new asset class hiding in plain sight
Wildfire catastrophe bonds are moving well beyond their insurance origins to become a genuine new asset class for investors’ portfolios, affirms the CEO of one of the world’s largest independent financial advisory organisations.
Nigel Green of deVere Group’s comments come as issuance of catastrophe bonds carrying wildfire exposure has already topped $5bn this year, according to specialist data provider Artemis, putting 2026 on track to challenge last year’s record.
The broader catastrophe bond market now stands at an unprecedented $61bn outstanding, after a 45% surge in new issuance last year alone.
He says: “Most investors still think of catastrophe bonds as something insurers deal with, not something that belongs in a serious portfolio. This thinking is already out of date.
“Wildfire losses are rising by roughly 12% a year globally, faster than almost any other category of natural catastrophe.
“Standalone wildfire bonds, once considered too specialised to trade on their own, are becoming genuinely investable instruments in their own right. This shift matters far more than most allocators currently appreciate.”
The deVere CEO points to the fundamental appeal of catastrophe bonds for investors seeking genuine diversification rather than another variation on equity or credit risk.
“These instruments don’t move because of a central bank decision or a disappointing earnings season.
“A wildfire either happens within the defined parameters of the bond or it doesn’t. This is a completely different risk driver to almost everything else sitting in a typical portfolio, and it’s exactly what makes it valuable.”
He argues the improving quality of wildfire risk modelling is the real story behind this year’s surge in issuance.
“Investors were historically cautious about wildfire risk because the modelling wasn’t good enough to price it with confidence,” Nigel Green explains.
“This has changed fast. Firms building these risk models have improved their data and their forecasting to the point where sophisticated investors are now comfortable putting real capital behind the numbers.”
The devastating Los Angeles fires of January 2025, which destroyed more than 16,000 buildings and caused a record $40bn in insured losses, reshaped how both insurers and investors think about wildfire exposure.
“This event was a wake-up call for the entire industry,” he says.
“California’s state-backed FAIR Plan has seen its exposure grow by over 50% in Los Angeles County alone in a single year, as traditional insurers pull back.
“Capital markets are stepping into a gap that private insurance increasingly can’t fill on its own, and investors willing to take on that risk are being paid well for it.”
Nigel Green believes Europe represents the next major phase of growth for this asset class, even though the market there remains far less developed than in the US.
“Europe is the fastest-warming continent on Earth and wildfire risk there is only heading in one direction,” he notes.
“The market hasn’t caught up yet, but it will have to. Once European wildfire modelling matures to the standard investors expect, capital will follow, the same way it did in California.”
He urges investors to look past the unfamiliar mechanics of catastrophe bonds and focus on what they actually deliver inside a portfolio.
“The instinct to treat this as a niche corner of insurance markets is understandable, but it’s increasingly wrong,” Nigel Green says.
“What investors should focus on is genuine, uncorrelated return. During a sharp equity sell-off, a well-structured wildfire bond doesn’t care what the S&P is doing. This kind of independence is rare and valuable, and it’s becoming easier to access than most people realise.”
He concludes: “The growth of this market reflects a broader shift already underway among savvy investors.
“Climate risk used to be treated purely as a cost to manage.
“It’s now becoming an asset class that a growing number of investors can actively allocate towards.”