Combining liquid cat bonds with private ILS unlocks broader diversification: Doris, Twelve Securis

While catastrophe bonds remain an attractive source of diversifying returns, investors focusing solely on public markets are overlooking a massive portion of the market. According to Cahal Doris, CIO of Private ILS at Twelve Securis, combining liquid cat bonds with selectively sourced private ILS is key to unlocking broader diversification and improving long-term, risk-adjusted returns.

Speaking to Artemis ahead of the launch of our Q2 2026 catastrophe bond and related insurance-linked securities (ILS) market report, Doris highlighted that while the cat bond market has matured into a premier institutional asset class, it still only represents a fraction of the broader ILS space.

“Investors able to access both public and private ILS markets may benefit from a broader opportunity set, additional diversification sources and relative value opportunities that are often unavailable through cat bonds alone. While private ILS involves reduced liquidity, its generally short-duration nature can allow investors to seek enhanced risk-adjusted returns without necessarily accepting the multi-year capital lock-ups associated with many other private market strategies,” Doris explained.

Adding: “Institutional investors have long viewed the investment “magic triangle” as a fundamental constraint: higher expected returns typically require accepting either greater risk or reduced liquidity. This principle also applies within ILS.”

In comparison to catastrophe bonds, the executive emphasised that private ILS investments can also offer potential for higher expected returns. However, private ILS investments tend to involve greater underwriting risk, reduced liquidity, or both.

This situation, as Doris points out, raises a crucial question for investors, in regards to whether they are receiving sufficient compensation for these trade-offs?

Moving forward the CIO affirms that beyond publicly issued catastrophe bonds lies a larger segment of privately negotiated reinsurance transactions, retrocession contracts and parametric structures, which provides access investors with access to risks, counterparties and transaction formats that are often unavailable in securitised form.

“For investors with the appropriate expertise and governance framework, these segments can offer attractive opportunities to enhance diversification and improve portfolio efficiency,” the executive said.

“The key advantage is not simply access to more risk, but access to a broader set of pricing mechanisms. Supply and demand dynamics are frequently different in the cat bond and reinsurance markets. Capital flows, renewal cycles and participant behaviour are not always synchronised, creating periods where comparable risks are priced differently across public and private markets. An integrated investment approach allows capital to be allocated dynamically towards the most attractive opportunities irrespective of market format,” Doris continued.

Importantly, Doris notes that this flexibility can be particularly valuable following major catastrophe events, as well as during key renewal periods, when pricing adjustments tend to emerge at different speeds across market segments.

As well as this, the CIO highlighted that the private ILS market offers access to a wider variety of transaction structures, including parametric solutions, bespoke attachment profiles and customised coverage, all of which can provide exposure characteristics that are difficult to replicate through cat bonds alone.

These features can be particularly valuable when constructing portfolios designed to optimise specific risk-return objectives.

Crucially, Doris explained to Artemis that liquidity remains an important consideration when it comes to venturing into the private ILS market.

“Private ILS does not offer the secondary market liquidity associated with cat bonds, and capital may remain committed beyond expected maturities in certain loss scenarios or following significant catastrophe events. However, unlike many private market strategies, the underlying contracts are generally short duration, with most transactions renewed annually or more frequently. As a result, investors are often accepting reduced liquidity rather than permanent illiquidity, while retaining the ability to actively reposition portfolios over successive underwriting cycles,” Doris explained.

As well as this, the CIO stresses that the ability to compare opportunities consistently across both public and private markets requires significant investment in underwriting expertise, analytics, technology and origination capabilities.

“Understanding differences in contractual terms, cedant quality, structural features and capital efficiency is critical when evaluating relative value opportunities. For this reason, successful implementation depends not only on market access but also on the ability to integrate investment decisions across the full spectrum of ILS opportunities,” Doris said.

Concluding: “Cat bonds remain an attractive and increasingly institutionalised source of diversifying returns. However, investors focused exclusively on public markets may be overlooking a substantial portion of the available opportunity set. By combining liquid cat bonds with selectively sourced private ILS investments, investors can access broader diversification, exploit relative value opportunities and potentially improve long-term risk-adjusted returns. In doing so, they may achieve a more efficient balance between return, risk and liquidity than is available through either market in isolation.”

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