Alternative / ILS capital rises to $141bn, drives reinsurance market growth in early 2026: Aon

Reinsurance capital reached a record high of $790 billion by the end of Q1 2026, but it was alternative or third-party reinsurance capital, so that deployed through insurance-linked securities and related collateralized structures, which was the sole driver of growth as it reached $141 billion, rising 4% from the end of the year, according to Aon.

The reinsurance broker said that with reinsurance capital at a record high, this influenced the renewals through the second-quarter and mid-year.

“A stable, well-capitalized and competitive reinsurance market provides insurers with an opportunity to align capital more closely with their risk strategies while using analytics and insight to support long-term growth,” explained George Attard, chief strategy officer, Reinsurance, Aon.

Aon said that this record capital level meant capacity was more than adequate to meet demand at the renewals, which has driven a lot of the pressure on reinsurance prices, alongside the competitive tendencies seen among market players.

As a result, double-digit price reductions were achieved by cedents at the June and July 1 reinsurance renewals, while catastrophe bond and sidecar sponsors also found favourable market conditions and achieved strong price execution.

When Aon last estimated the amount of third-party and ILS capital in reinsurance, the broker said it grew by 18% over the course of 2025 and 10% just in the fourth-quarter to reach a record $136 billion at the end of last year.

Now, an additional 4% of growth was seen in the first-quarter of 2026, taking the total ILS capital in the reinsurance sector to $141 billion, a new high by Aon’s numbers.

We can compare the latest figure for alternative and ILS capital from Aon, $141 billion, with the one revealed by Gallagher Securities just this week, which is for it to have reached $142 billion as of the same end of Q1 2026 date, so very closely comparable.

Since the end of 2022, when ILS capital dipped in the industry, under Aon’s numbers the total has risen by almost 52%, while under Gallagher Securities numbers it has risen by 48%.

The stunning period of ILS capital expansion seen since 2023 began has been in part driven by the growth of the catastrophe bond asset class and the expansion of reinsurance sidecars over the following period.

Both have expanded faster than collateralized reinsurance or industry-loss warranties (ILWs), although it seems some growth has been seen in both areas around the mid-year.

Ne investor commitments continue to be attracted into the ILS sector, as non-correlating returns remain an attractive proposition, Aon explained.

This increased investor appetite has helped to lower reinsurance firm’s retrocession costs, provide more catastrophe bond limit for sponsors and enable sponsors of sidecar structures to expand their vehicles as well.

Commenting on the outlook, Richard Pennay, CEO of Insurance-Linked Securities at Aon said, “Looking ahead to the remainder of 2026, we anticipate that the catastrophe bond market and broader third-party capital activity will remain robust, supported by strong investor appetite for both catastrophe bonds and asset driven sidecars. As the market approaches the North Atlantic hurricane season, we expect a sense of optimism for investors as they pursue a double-digit catastrophe bond return for the fourth year in a row.”

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