Since the European Securities and Markets Authority (ESMA) published its technical advice to the European Commission (EC) on the UCITS Eligible Assets Directive (EAD) and what that could mean for catastrophe bonds in UCITS funds, the Authority has been notably silent on the matter.
We’d reached out when the advice was published and have done again since, but have not managed to elicit a response to-date. ESMA isn’t exactly known for being vocal on topics such as this, so that’s perhaps unsurprising.
But now, in an interview with Euronews, an ESMA policy officer spokesperson has given some insight into how the Authority feels about the eligibility of catastrophe bonds within UCITS fund strategies, the first view from the inside as such that we’ve seen. It implies nothing has changed, despite the feedback ESMA will have received since publishing the advice.
Kian Navid, a senior policy officer for investment management at ESMA, is cited by Euronews as saying that the technical advice is not passing judgement on catastrophe bonds.
He is quoted as saying, “It is not that ESMA’s technical advice takes a position against retail investors accessing cat bonds per se. The advice is not about outlining what constitutes a good or bad investment, but it provides data and risk analyses for the European Commission’s consideration.”
Perhaps more notably though and indicating that ESMA is sticking by its view, Navid said, “However, conceptually, if you opened up UCITS to alternative assets (like cat bonds) beyond 10%, that would risk blurring the lines between UCITS and alternative investment funds (AIFs).”
In its technical advice, ESMA had explained that it has no concerns about UCITS funds that allocate up to 10% indirectly to alternative assets, such as catastrophe bonds.
Which the Authority appears to be sticking to, based on the comments from Navid of ESMA.
Alternative investment funds (AIFs) are collective investment funds that are not covered by the directive on undertakings for collective investment in transferable securities (UCITS), it was introduced under AIFMD in 2011 and rolled-out in 2013.
Cat bond managers had been utilising UCITS fund structures prior to that, since as early as 2009.
UCITS catastrophe bond funds hit $17.73 billion in combined assets under management at the end of September 2025, demonstrating how important this fund structure has become for the sector.
We have continued to see new UCITS cat bond fund strategies launching as well, including from Man Group and a soon to launch UCITS ETF from King Ridge Capital Advisors. We understand there is at least one more in the works as well.
The view amongst most of the market remains that the European Commission will conduct its own consultation on this important topic which will take time. While other national regulators in Europe are not all aligned with ESMA’s view, sources suggest. Any change that does come about as a result of this is likely to take some years, with it necessary for regulators to ensure cat bond fund managers have time to adjust, or establish routes to transfer their investor clients to a different fund structure.
But ESMA is sticking with its advice, the comments from Navid suggest.
So, it’s natural the insurance-linked securities (ILS) community will turn its focus to further consultation processes and helping the European Commission understand the role of catastrophe bonds as investment instruments and their applicability to the UCITS wrapper.
Also read:
– ESMA UCITS cat bond issue “a kind of power struggle between national regulators” – Plenum’s Grieger.
– LGT ILS Partners sees retail investor path as part of ESMA’s proposed UCITS ruling: Stahel.
– ESMA conceptually takes view cat bonds may sit better under a new AIF wrapper framework.
