60% of institutional investors intend to increase ILS allocations: Gallagher Securities survey

A survey of institutional investors recently undertaken by Gallagher Securities found that 60% are intending to increase their allocations to insurance-linked investments, with catastrophe bonds and similar insurance-linked securities (ILS) seen as the main type of assets in focus.

The survey found that institutional investors are currently showing a clear preference for insurance-linked investment structures that offer scalability, transparency, and direct access to underwriting returns, the broker-dealer explained.

The findings also suggest that how capital is deployed is becoming as important as how much is available, Gallagher Securities said.

The findings from the survey are drawn from interactions with more than 60 large and complex institutional investors collectively, across senior individuals of which 94% possessed direct authority over allocation decisions. Their firms are of institutional scale, with 72% overseeing assets exceeding $1 billion, and 16% managing assets surpassing $100 billion.

The investors surveyed were a mix of insurance and reinsurance sector specialists and generalist asset managers, with 85% being a type of asset manager, plus survey participation from private equity, pension funds, family offices and private credit platforms.

The findings include the fact that 60% of the investors intend to increase their allocations to insurance-linked assets and ILS over the next two years.

The clear preference for well-structured, transparent investments and also liquidity are evident, as 79% said they will target catastrophe bonds and other similar ILS opportunities, while 53% are targeting reinsurance sidecar investments.

The findings suggest no slow-down in investor appetite for ILS, which suggests the increasing build-up of third-party capital from institutional investors in the reinsurance space.

Direct access to underwriting returns is a key focus across types of investors these days, including some that previously might have backed private equity opportunities in the insurance and reinsurance sector, it seems.

Gallagher Securities, the broker-dealer and investment banking unit of Gallagher Re explained on investor preferences, “Catastrophe bonds remain the primary destination for new allocations, with 79% of respondents targeting the asset class. Their appeal lies in repeatable deal mechanics, clearly defined downside, and post-loss transparency, allowing investors to scale exposure efficiently and evaluate risk with confidence.

“Sidecars and structured balance sheet solutions are also attracting strong interest, with 53% of investors planning allocations. These structures provide alignment with underwriting performance and access to more tailored or less commoditised risk.”

While on the equity investment side, Gallagher Securities said, “By contrast, appetite for direct investments in insurance company equity or debt remains more limited, with only 21% of respondents targeting these strategies, reflecting the higher operational complexity and governance requirements associated with ownership structures.”

Jason Bolding, CEO of Gallagher Securities, stated, “We’re in a market where capital wants access to high quality underwriting, and insurers want stable, scalable capacity. The value comes from building the bridge between the two.”

As you’d expect, key drivers of investor preferences include the relatively uncorrelated nature of catastrophe bond and ILS investments with the public markets.

As well as the diversifying stream of returns they can offer and the ability to more directly access insurance and reinsurance underwriting returns as a distinct form of performance.

Almost 73% of respondents cited a preference for gaining access to property catastrophe re/insurance returns through their allocations to ILS and insurance-linked assets.

Interestingly, cyber risk exposure was the next highest preference at just over 27%, with casualty risks at almost 23%.

Gallagher Securities and Gallagher Re again highlighted the notable rise in investor appetite and sophistication within the ILS sector, noting this is increasing with the scale of the asset class, while also in focus for allocators are a growing emphasis on transparency, governance and structure-specific return expectations.