Insurance linked securities (ILS) capital has continued to break records in 2025, according to a recent report by Fitch Ratings, with catastrophe bonds issuance reaching unprecedented numbers, total alternative capital also hitting a record high, and sidecar growth.
A surge in investor interest, both existing players and new entrants, has funnelled significant capacity into the sector, particularly in the upper layers of reinsurance programmes.
“This increased capacity supporting new and upsized transactions has resulted in spread tightening, benefitting sponsors, although expected returns are still attractive to investors,” Fitch stated.
The active ILS sector has more than compensated for reduced allocations from some traditional reinsurance carriers, the report also highlighted.
Catastrophe bonds issuance reached an unprecedented USD16.8 billion in the first half of 2025, a new half-year record and just below the full-year issuance record of USD17 billion in 2024.
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This period included three catastrophe bonds of USD1 billion or more – Everest (USD1 billion), Citizens (USD1.525 billion), and State Farm (USD1.55 billion) with the largest single catastrophe bond ever issued. Total catastrophe bonds outstanding reached a record USD54.3 billion.
Total alternative capital reached over USD115 billion, also a record high, the report stated.
Beyond catastrophe bonds, the market has also benefitted from growth in sidecars. These vehicles, which allow investors to take on a portion of a reinsurer’s risk, grew in property catastrophe and in non-catastrophe, including casualty risk.
Looking ahead, Fitch expects continued growth in the alternative reinsurance capital market in 2026, with strong supply from investors, as loss activity has been limited, and significant demand from sponsors, as they manage increased risk.
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