Casualty ILS needs to demonstrate discipline through market cycles to attract capital: MultiStrat CUO

Speaking with Artemis at the 2026 Monte Carlo Rendez-Vous, Kier James, Chief Underwriting Officer (CUO) of MultiStrat, underscored that as the casualty insurance-linked securities (ILS) market continues to grow, it also needs to demonstrate that it can be disciplined throughout market cycles in order to continue attracting capital and build confidence with investors.

The casualty ILS market has experienced heavy momentum and expansion in recent years, as institutional investors continue to show heightened interest in longer-duration yield opportunities, which has helped drive a surge in casualty-oriented structures.

However, as casualty ILS continues to grow, maintaining market discipline is going to be one of the biggest challenges going forward, James highlighted to Artemis.

“I think as capacity increases, there’s always going to be a desire to deploy. I don’t think it’s gone unnoticed that alternative capital is entering into the market at increased volumes. I do think casualty ILS vehicles are taking a disciplined approach at present, and we hope that that’s maintained over the coming years. I also think what has helped maintaining this discipline is the gradual reserve strengthening in some of those lines casualty ILS has traditionally participated in,” James explained.

He continued: “Historically some lines have proven challenging, and they’re continuing to prove challenging. I think commercial auto is one of them, because it’s a strange one given that there seems to be an abundant supply of capacity coming into the market despite relatively poor performance, although rate rises continue, so the situation is improving. I think we’re heading towards rate adequacy, but I don’t think we’re there just yet, and we’re certainly still seeing some lost development on back years from 2020 onwards.

“Overall, I think there’s still some development there and reflected in reserve strengthening still trickling through, and I think that’s keeping people on their toes and is keeping people disciplined. We’ll probably also see this in other lines too. I think this also applies to some general liability lines too, which should again assist with maintaining discipline.

“I think casualty ILS needs also to demonstrate that it can be disciplined throughout market cycles in order to continue to attract capital and build confidence with investors,” James added.

Casualty sidecars have emerged as a primary catalyst for growth within casualty ILS, given the  increased investor appetite that’s being displayed across the market towards these vehicles, a trend that James expects to continue building momentum.

“I think casualty sidecars will likely see increased adoption as when you look at it functionally, it is an intelligent strategy because, it allows established rated balance sheets to increase line sizes, generate fee income, in addition to it being an efficient capital management strategy,” the CUO told Artemis.

“Given this, I can’t see the market reducing in size. And as said, as you’re fighting for market share, rather than increasing the amount of capital you’re holding, you can use alternative and external capacity to support your balance sheet, which is a very smart capital management strategy. And I think as investors become more comfortable with a wider diversity of lines of business more of these are going to find their way into these sidecars,” James added.

To end, James addressed whether he sees ILS capital playing a larger role in the broader casualty space in the near future.

“I absolutely see it doing so, yes. Even if it follows the trajectory of the property cat ILS market, there’s still a long runway. Casualty ILS is still relatively nascent, but the casualty market itself is absolutely enormous, so the opportunity is definitely there for substantial growth.

“I think the education process has now been done. Investors and cedents understand what the product is, and in conjunction with the favourable interest rate environment, it presents a great opportunity for investors to generate additional returns in addition to underwriting margin.”

James concluded: “I would say that we’re very much at basecamp at the moment. I think it’s only going to accelerate if anything, and that’s where discipline is important. Some risks are also too large for the reinsurance industry which provides opportunities for the capital markets and alternative capital. This opens up opportunities for new products which could actually diversifies the types of coverage the insurance industry itself is able to offer.”

Read all of our interviews with ILS market and reinsurance sector professionals here.