The traditional reinsurance market is expected to present heightened competition to insurance-linked securities (ILS) in 2026, but investor inflows, a strong maturities schedule, and retained earnings should keep ILS capital levels healthy and catastrophe bond pricing attractive to cedents, executives from GC Securities told Artemis.
With 2025 being a particularly exceptional year for the ILS market, momentum across the market is expected to continue throughout 2026, according to Sweitzer.
“We expect that the growth momentum in the cat bond market, and ILS more broadly, seen in 2025 will generally continue in 2026. Investor appetite for cat bonds remains healthy as the market continues to offer diversification benefit and, despite further rate softening this year, a track record of attractive relative returns,” Sweitzer explained.
Adding: “Riding a year of manageable global cat loss, we expect the traditional reinsurance market to offer increased competition to ILS in 2026. But, investor inflows, a strong maturities schedule, and retained earnings should keep ILS capital levels healthy and cat bond pricing attractive to cedents looking to maintain diversity and balance in their panel of risk transfer partners.”
Activity across the catastrophe bond market in 2025 resulted in a landmark issuance year for the sector, with 2025 becoming the first year to see over $20 billion of cat bond issuance.
“We believe that the catastrophe bond market will carry its excellent momentum into 2026 given that two deals are already marketing in 2026. 15 new sponsors accessed the market for the first time in 2025 bringing the total number of new entrants since 2020 to over 60,” Anger told Artemis at the time of the interview.
“We have already started to see the first of these new sponsors prepare to renew their 2022/2023 vintage cat bond-based protection. As these bonds mature, such sponsors will be returning to the market for renewal issuances. In general, once a new sponsor utilizes the cat bond market, we find that they tend to add incremental cat bond protection through additional issuances.”
A number of cat bonds in 2025 also exceeded $1.5 billion in size, with US insurer State Farm sponsoring the largest catastrophe bond sponsorship on-record, securing $1.55 billion of multi-year, fully collateralized and multi-peril reinsurance from the capital markets through its Merna Re 2025 issuances.
State Farm’s record deal came shortly after Florida’s Citizens Property Insurance issued a $1.525 billion Everglades Re II Ltd. (Series 2025-1) issuance, which at the time was the record for the largest cat bond sponsorship.
In addition, Anger also emphasised that successful placement of standalone California wildfire and Canadian risks, UK indemnity flood risk and India perils showcases new possibilities for further growth for the cat bond market in 2026.
“We expect continued focus on US perils, expansion of US wildfire protection and increased used of aggregate-based protection that re-grew significantly 2025,” she added.
Given that the catastrophe bond market is presently experiencing lower spreads compared to the peaks recorded in 2023, Anger also discussed whether GC Securities views the current lower spread environment as sustainable.
Additionally, we also inquired whether the executive expects a rebound to levels that fall between the current state and the peak, as excess capital is absorbed in the upcoming months.
“ILS pricing tends to be collared between traditional reinsurance pricing and corporate credit spreads. With corporate credit spreads low, catastrophe bonds are pricing competitively to the traditional reinsurance market which is cyclical and has ample capacity. Current spread dynamics reflect recent favourable loss experience, and the pricing will adjust going forward if new loss events cause unexpected capital depletion,” she explained.
“Also, a portion of cat bond returns comes from collateral yields which continue to hold up (currently between 3-4%). Overall, we expect cat bonds to remain an attractive and diversifying asset class for the near term for investors,” Anger continued.
Also read: GC Securities execs see sidecars as big focus for 2026. Flag aggregate capacity challenges
Read all of our interviews with ILS market and reinsurance sector professionals here.
