Today’s insurance-linked securities (ILS) market is significantly broader and more resilient than it was just several years ago. However, while the market is seeing growing interest in casualty, specialty, cyber, and hybrid structures, this evolution also means the ILS space is fundamentally more complex, according to Kathleen Faries, CEO of Artex Capital Solutions.
The report highlights that while 2025 delivered a record-breaking year with $25.6 billion in new cat bond issuance and 2026 also sees cat bonds on a similar pace so far, the global ILS and catastrophe bond market now faces the challenge of maintaining that momentum and surpassing its own high benchmark.
“The growing interest in other insurance lines, such as cyber and specialty, has yet to be reflected in the outstanding market, which grew to a record USD61.3 billion at year-end. Rule 144A property Cat bonds dominated that total, with USD57 billion outstanding. Even in a quarter that included the largest cyber deal ever, USD300 million, single and multi-peril Cat bonds dominated,” the report reads.
Looking past these figures, Artex outlines that it would be premature to dismiss cyber liability as a strong candidate for the cat bond market.
Highlighting Beazley’s $300 million PoleStar Re Ltd. (Series 2026-1) issuance from last December, the largest cyber catastrophe bond recorded to date, Artex notes that the success of this deal demonstrates sustained interest in cyber from both issuers and investors across the market.
In contrast to the public ILS market, the private market has seen more robust growth in risks tied to other types of insurance, particularly casualty. Similarly, as investors initially sought property to introduce a non-correlating asset class, Artex acknowledged that casualty presents a chance for diversification within the ILS market.
Additionally, Artex also highlighted how in long-tail lines alternative capital activity has roughly doubled over the last 12 months.
“However, issuance growth is only one side of this growth story. Insureds’ desire for alternatives to traditional reinsurance solutions — even when the market is tipped in their favor, as the current one is — is matched by investor interest in this dynamic market. While the market is still almost exclusively for institutional investors, new investor groups, such as family offices, have become active in both the public and private ILS markets,” Artex added.
The casualty space has also continued to attract attention from private credit investors and others seeking long-duration, low-severity, and high-frequency investments.
Artex observes that perhaps no investor group has emerged as a swift market influence quite like private credit firms. These entities are drawn to the casualty market because they can optimise underwriting returns by actively managing the investments associated with premium cash flows.
Reflecting on this shifting landscape, Faries commented: “Today’s ILS market is significantly broader and more resilient than just a few years ago when it was a single product, single peril market. While property still dominates, we’re seeing growing interest in casualty, specialty, cyber and hybrid structures.
“With regard to casualty, we’re seeing a sharp rise in sidecar activity and growing use of collateralized casualty quota shares. In addition, investors now have improved access to Lloyd’s syndicates and the Specialty market through the London Bridge transformation platform.”
She concluded: “While it’s exciting to see this evolution, it also means that the ILS market has become more complex than it was a few years ago. That speaks to the increased need to work with firms with the risk management, governance and actuarial bench strength needed to address the challenges and opportunities as they exist today.”
