The 2025 Atlantic hurricane season forecasts, alongside physical indicators for conditions and internal risk modelling, suggest a season of average-to-moderate activity, leading specialist insurance-linked securities (ILS) investment manager Twelve Securis to call it a “relatively balanced risk landscape.”
Twelve Securis, a manager of portfolios of catastrophe bonds, private ILS and other reinsurance-linked investment assets, notes that the Atlantic hurricane season, that officially began on June 1st, “is the most significant driver of risk and return for our catastrophe-focused insurance-linked securities (ILS) portfolios.”
Adding that, “Given that most ILS funds are heavily exposed to US windstorm risk, the occurrence of landfalling Atlantic storms are central to annual portfolio outcomes.”
Twelve Securis has, through its research and analysis, continually refined its approach to portfolio construction in the context of major natural hazards, such as the hurricane season.
Having analysed public forecasts for the 2025 Atlantic hurricane season, alongside meteorological and climate data on physical indicators, and undertaken its own internal modelling with partner Reask, Twelve Securis believes the forecasts are more closely aligned this year, with hurricane activity broadly aligned with long-term averages seen as the most probable outcome for the season at this time.
Looking back, Twelve Securis notes that while 2023 and 2024 were active hurricane seasons in the Atlantic, the resulting losses to the insurance and reinsurance market remained below the levels where most catastrophe bonds and ILS contracts would be significantly impacted.
“These outcomes underscore the importance of sound structuring, diversification, and hazard-informed risk selection,” Twelve Securis explained.
For 2025, the public forecasts are “more moderate and show stronger consensus,” the ILS manager noted.
Twelve Securis does caution that the hurricane season forecasts can change meaningfully between the pre-season and August, when updates are often made, and it’s important to also consider other inputs such as how sea surface temperatures are developing, as well as the state of ENSO.
The ILS manager also highlights that even below-average hurricane seasons can result in meaningful insured losses, if a storm results in a large event and causes impacts in high-exposure concentration areas.
But, analysis of previous seasons and forecasts for 2025, shows that hurricane seasons with the potential for significant ILS market impact remain rare or low in probability, even during a season with high accumulated cyclone energy (ACE).
In analysis conducted with its partner Reask, Twelve Securis said, “Our interpretation of both current and forecasted climate conditions – along with the range of public forecasts – suggests that 2025 is likely to fall toward the lower end of the range indicated by the Reask-ECMWF outlook. We expect risk levels in 2025 to be broadly in line with the average observed over the past two decades.”
It’s important to note that Twelve Securis highlights certain caveats with this analysis, which is based on a granular landfall location-intensity distribution, and notes that it remains experimental.
Concluding, Twelve Securis said, “The 2025 Atlantic Hurricane Season is predicted to be more moderate compared to the heightened activity levels of the past two years.”
Adding, “Ultimately, while uncertainty is inherent in any hurricane forecast, the convergence of public outlooks, physical indicators, and internal risk modelling all point toward a season of average-to-moderate activity. For investors and stakeholders in ILS, this suggests a relatively balanced risk landscape – one that warrants ongoing attention but does not currently indicate an outsized likelihood of loss experience.”
Twelve Securis further stated that, “Importantly, ILS has the ability to offer attractive compensation for the inherent short-term variability of hurricane seasons.
“We view the 2025 forecast as broadly aligned with our internal risk assessment, and we see no need for immediate changes to our strategy.
“For long-term investors, ILS remains a strategic allocation that offers compelling, diversifying returns grounded in robust risk analysis and resilience to annual volatility.”
