As the insurance-linked securities (ILS) market persistently acts as a moderating force, helping to create a more managed reinsurance cycle, PwC expects deeper integration and greater alignment of interests between alternative capital and rated balance sheets, according to Arthur Wightman, Territory Leader of PwC Bermuda.
“ILS penetration in Bermuda is now well over a decade old, and has really helped to transition to a more managed cycle, as opposed to sharply cyclical. And that’s a good thing,” said Wightman.
He underlined the structural innovations driven by the ILS space, supported by its deep roots in Bermuda, and described the sector as a “persistent moderating force” in the broader risk transfer universe as it “de-peaks the historic rating environment.”
Bermuda’s dominance in the ILS and alternative capital market was highlighted by its regulator, the Bermuda Monetary Authority (BMA), in April. The data shows that as at the end of Q4 2025, Bermuda-based ILS funds represented around 8% of all regulated funds in Bermuda, accounting for 6.1% of total net asset value. This is a rise from 5% at the end of Q4 2024, and 4.4% at the end of Q4 2023.
“The Bermuda market has really embraced ILS, so we would at PwC expect to see much deeper integration, not displacement. Rated balance sheets and ILS are complementary structures within the overall portfolio of reinsurance companies here, and that’s not going to change.
“So, much more integration of alternative capital into core underwriting strategies, and there’s lots of pricing discipline that will come from all of that. Also, structuring helps, but it’s not necessarily one versus the other,” he said.
Wightman also told Artemis that PwC expects there to be a greater alignment of interest between ILS and traditional reinsurance companies.
“Historically, as ILS started, there hasn’t been as much of an alignment of interest between whether it’s rated balance sheet, the carriers, the investors, and so on. I think there’s much more symbiosis now. So, we’ll see many more multi-year deals, managed collateralized structures, that sort of thing.
“And then, I think the final point, which is probably the most significant, relative to our market here in Bermuda, is that the rated balance sheets will retain control. And so, there’s that harmonious environment between ILS and core reinsurance, but it’s all under one umbrella, largely with the reinsurers returning overall control,” concluded Wightman.
