The insurance-linked securities (ILS) fund sector began 2026 with an above-average January, as the average return across ILS funds tracked by the ILS Advisers Fund Index stood at 0.71% for the month.
For the ILS market though, direct impacts from these events are expected to be relatively minimal.
ILS Advisers commented, “While these events are not expected to impact the cat bond market, they highlight the growing contribution of secondary perils to industry losses and the erosion of annual aggregate covers.”
Aggregate erosion can affect both catastrophe bonds and private collateralised reinsurance or retrocession arrangements, of course, reducing the retention buffers sitting beneath attachment points in some cases.
But, for January 2026 direct impacts have not derailed ILS fund returns, with the strategies in the ILS fund sector tracked by the ILS Advisers Index reporting an average return of 0.71% for the month.
The average across January ILS fund returns in the history of the Index is just under 0.5%, while last year the ILS fund sector started off 2025 with a -2% performance due to the impacts of the Los Angeles wildfires.
Pure catastrophe bond funds as a group closely tracked the market benchmarks, delivering an average return of 0.55% for January 2026 (the Swiss Re Index was up by 0.56%).
On the private ILS fund side, strategies that allocate to reinsurance and retrocession arrangements as well, fared better in delivering an average return of 0.9% for January 2026.
All ILS funds that have reported their January 2026 returns to the ILS Advisers Index so far were positive for the month.
Across the ILS funds that have reported their January returns there was a reasonable spread, reflecting the diversity of strategies, with the lowest performing ILS fund delivering a 0.31% return, the best performing delivering a positive 1.46% performance for the month.
It’s a healthy start to 2026 despite lower reinsurance and catastrophe bond pricing and spreads, with ILS funds able to beat historical averages and deliver benchmark level performance.
Track the ILS Advisers Fund Index here on Artemis.
You can track the ILS Advisers Fund Index here on Artemis. It comprises an equally weighted index of 36 constituent insurance-linked investment funds which tracks their performance and is the first benchmark that allows a comparison between different insurance-linked securities fund managers in the ILS, reinsurance-linked and catastrophe bond investment space.
