The post $17.5 billion in catastrophe bonds under threat as EU mulls retail fund ban appeared on BitcoinEthereumNews.com.

Asset managers across Europe and the U.S. are on alert after the European Securities and Markets Authority (ESMA) told the European Commission that catastrophe bonds, tied to extreme natural disasters, don’t belong in funds sold under the UCITS label. The warning puts $17.5 billion worth of bonds at risk, all of it currently sitting inside funds meant to be safe enough for retail investors. The decision now sits with the Commission, and if they go along with it, fund managers could be forced into a fast and messy selloff. The catastrophe bond market is worth around $56 billion, and about one-third of that is now wrapped up in UCITS products. Over the past year alone, about $5 billion more was added to these funds, according to Plenum Investments. This is all happening during the U.S. hurricane season, which is when many of the most active cat bonds get triggered. The potential fallout is serious, especially for retail-heavy portfolios. Neuberger and PGGM flag liquidity risks and exposure gaps Peter DiFiore, managing director at Neuberger Berman in New York, warned that the idea that these bonds are untouchable during market turmoil is a dangerous myth. “We’ve not yet seen a big liquidity event,” Peter said. “The case for liquidity is much higher than it was before.” His firm manages $1.3 billion in cat bonds, none of which are in UCITS products. But he’s watching closely. If retail-heavy funds are forced to unwind quickly, it could create what Peter called “buying opportunities in the secondary market.” These bonds work like this: an insurance company wants to spread risk in case something like a hurricane wipes out a city. So they issue a catastrophe bond, and if nothing bad happens, the investors earn big. But if disaster hits, literally, investors can lose most or…

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Filed under: News - @ September 14, 2025 10:12 pm