Direct institutional investor allocations to reinsurance grew at fastest rate in 2025: Marsh Re

Allocations to reinsurance grew fastest among direct institutional investors in 2025, outpacing the growth rate of assets deployed at independent insurance-linked securities managers and reinsurer sponsored managers, according to recent data from broker Marsh Re.

The reinsurance sector has a record amount of excess capital at this time, with this expected to grow further by the end of 2026.

As reinsurer earnings remain strong, abundant investor interest keeps expanding the alternative capital base and major loss activity remains relatively benign so far, the capital base of the sector has kept expanding.

Recent data from AM Best and Marsh Re (under the Guy Carpenter branding at the time) showed that third-party capital in reinsurance, deployed through alternative capital vehicles, catastrophe bonds and insurance-linked securities, had reached $123 billion by the end of 2025 and is projected to grow to around $130 billion by the end of 2026.

Total third-party capital, according to the Marsh Re and AM Best measurement, grew 15% in 2025 and is expected to expand a further nearly 6% this year.

But new information shared by Marsh Re shows that the growth rate has been different across the various cohorts of investor capital sources, with direct institutional investors growing their allocations to reinsurance at the fastest rate through 2025.

Total alternative and ILS capital has grown by more than 250% between 2013 and 2025, according to Marsh Re’s chart.

But most interesting is the sudden spurt in growth of direct institutional investors through 2025, who’s allocations are estimated to have increased by around 57% in that year.

Since 2013, when Marsh Re’s chart begins, the direct institutional investor bracket of allocators to reinsurance had been growing particularly slowly, but 2025 saw a meaningful uptick as it grew from $7 billion to $11 billion of the total third-party capital market.

Independent specialist ILS investment managers grew their assets deployed by around 11% in the year, from $63 billion to a new high of $70 billion.

At the same time, reinsurer sponsored third-party capital investment management teams grew slightly faster by 13.5%, from $37 billion to $42 billion.

As a result, independent ILS managers remain the largest cohort of allocators to reinsurance in the Marsh Re analysis, but the expansion of direct institutional investors in the ILS sector is notable.

Laurent Rousseau, CEO of Global Capital & Advisory, and Europe & IMEA at Marsh Re said, “As interest rates have increased from 2022, several alternative asset managers have allocated meaningful amounts of capital to the (re)insurance industry based on a different value proposition.”

We wonder if this hints at expansion of the sector into the longer-tailed casualty and more asset-side intensive sidecar arrangements that have begun to be frequently seen over the last year and a half.

That development could explain the expansion of the direct institutional investor bracket, but we have also seen some direct allocators in the multi-strat asset manager space increasing their own direct allocations to catastrophe bonds and ILS structures as well.

The changing investor mix adds to the abundant and increasingly diversified pool of reinsurance capital that is available, which is of course exacerbating softening prices as well (although it is not considered the main driver still, that is traditional reinsurer excess capital).