Catastrophe-Bondholders Bet Hurricane Polo Won’t Trigger Losses

September 25, 2026 by Gautam Naik

Investors in a catastrophe bond targeting Mexico are betting they’ll be spared losses as Hurricane Polo looks set to avoid landfall as a dangerously destructive storm.

“I’d never say never,” said Florian Steiger, chief executive of Zurich-based cat-bond manager Icosa Investments AG. “But right now, I’m not too concerned.”

On Thursday, Hurricane Polo — a giant storm traveling at roughly 160 miles per hour (257.5 kilometers per hour) — drenched parts of Mexico with heavy rain. But for now, Polo’s powerful core is on a northwest track, according to a report by the US National Hurricane Center.

Mexico’s $175 million cat bond, arranged by the World Bank, protects it from losses caused by named storm events occurring on the Pacific side of the country.

Polo is expected to remain a hurricane as it reaches Mexico’s Baja California peninsula early next week, though it should be weaker by then, according to the NHC. As in previous hurricane seasons, however, conditions can quickly change.

Cat bonds allow insurers — and sometimes governments — to pass part of their risk over to capital markets. Investors in the bonds face losses if a predefined catastrophe occurs, but stand to reap significant gains if it doesn’t.

Mexico’s bond is designed to trigger only if the storm travels over a specific region of the country, and if its central pressure — a proxy for wind speed — falls below a certain threshold.

Investors in cat bonds, a market that’s almost doubled in size since 2021 to more than $60 billion this year, lost out in 2025 when Hurricane Melissa slammed into Jamaica. That event wiped out the entire $150 million bond, which had also been arranged by the World Bank. So far this year, investors are expecting El Niño to suppress major storm activity in the Atlantic basin. Exactly how the weather phenomenon plays out, though, remains uncertain.

Isacco Loconte, an insurance-linked securities specialist at asset manager Azimut Switzerland SA, said in a LinkedIn post earlier this week that there are more than 70 scenarios in which Hurricane Polo might trigger a payout of the Mexico cat bond, with potential losses ranging from 25% to 100%. Loconte also noted that the secondary market has signaled some uncertainty.

Steiger at Icosa says such risks aren’t enough to erode demand for the bonds. “We haven’t seen investors pulling back,” even though returns have come down in recent years, he said.

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