Flooding has caused significant damage to Asheville, North Carolina. A picture taken by Melissa Sue Gerrits/Getty Images illustrates the extent of the devastation.

Now, individual investors have the opportunity to invest in catastrophe bonds through an ETF. The Brookmont Catastrophic Bond fund provides access to the $50 billion cat bonds market. Investors have shown interest in cat bonds lately due to the attractive yields they offer, especially as global natural disasters increase.

A previously exclusive high-risk, high-reward market is now becoming more accessible to the general public. The world's first catastrophe bond ETF will commence trading, boosting accessibility to a market that has seen substantial growth alongside the escalating climate risks globally.

Despite the recent surge in cat bonds - reaching record sales of $17.7 billion last year - the market has been predominantly limited to private investors. The Brookmont Catastrophic Bond ETF, trading on the NYSE under the symbol ILS, now provides retail traders the chance to participate.

Ethan Powell, the principal and chief investment officer of the firm, mentioned in an interview with Bloomberg TV that the investable market for catastrophic bonds has grown from sub-$10 billion years ago to $50 billion today. The firm anticipates this market to expand to $80 billion by the end of the decade.

Catastrophe bonds are fixed-income securities designed to finance insurance payouts following disasters. Investors receive double-digit yields, though they face the risk of losing their investment if a catastrophe leads to insurance companies paying out. Additionally, these bonds play a vital role in helping reinsurers transfer climate disaster risks and ensuring a continuous flow of payouts to policyholders affected by disasters.

Despite the recent surge in disasters across the US, investors are increasingly investing in these debt instruments. In 2024, the Swiss Re Global Cat Bond Index rose by 17%, despite the damage caused by Hurricanes Helene and Milton. Hurricane Ian in 2022 was the last significant challenge faced by the market, according to Bloomberg.

The Brookmont ETF still has unanswered questions surrounding how it plans to hedge against potential losses and navigate the market's limited liquidity.