Large investors such as pensions and hedge funds are estimated to have spent $18.6 billion so far in 2025 buying catastrophe bonds, which insurers and reinsurance firms sell to shed some of the risk of massive natural disasters like hurricanes, The Washington Post reports.

The so-called “cat bonds” often pay double-digit interest rates and help ease the pressure on insurers. The bonds spread the risk to outside investors, protecting insurers from getting wiped out by a single natural disaster.

Robert Hartwig, who directs the Center for Risk and Uncertainty Management at the University of South Carolina, says insurance prices would be “much higher” today if it were not for cat bonds.

The cat bond market was created in response to Hurricane Andrew, growing steadily for years before exploding after Hurricane Katrina, the costliest natural disaster in U.S. history.

Read more from The Washington Post.