Fitch bullish on ILS momentum, with only “slight” growth forecast for traditional reinsurance capital

At the Monte Carlo Rendez-vous today, Brian Schneider, Global Head of Reinsurance Ratings at Fitch Ratings seemed more bullish on the insurance-linked securities (ILS) market continuing its recent pace of growth, while traditional reinsurance capital is only forecast for “slight” growth this year.

Speaking during the Fitch Ratings briefing at the RVS in Monte Carlo this morning, Schneider explained that reinsurance capital levels have continued to grow, but highlighted that ILS expansion means third-party investor capital commands a growing share of the overall.

Schneider told the audience, “Total global reinsurance capital was up $15 billion for overall capital to $800 billion in the first-half of this year, after rising 10% in 2025.

“Traditional capital was up $7 billion in the first-half to $656 billion, with the additional retained earnings from underwriting income and investment income, offset by the additional return of capital to shareholders.

“We do expect slight growth for capital in the full-year 2026.”

Then he explained that, “Overall, you can see the traditional capital still dominates, but it is actually declining a bit.

“It provided 82% of the total market capacity at the mid-year this year, which is down from 83% in 2025 and 84% in 2024, as ILS continues to grow.”

Moving on to explore insurance-linked securities capital more thoroughly, Schneider said that expansion of the market is expected to continue.

“With ILS, you can see here that that has grown as well. So it was $144.5 billion at the second quarter of 2026, up from $136 at year-end 2025,” he stated.

Adding that, “There’s been record cat bond issuances, currently outstanding about $64 billion of catastrophe bonds, and then also what’s grown even more recently has been the sidecar capital that is up to $23 billion outstanding, which is 50% growth since the end of 2024.”

Then Schneider said that at Fitch Ratings, “We do expect this growth to continue in the ILS space. We see strong supply from investors, including the alternative investment managers, to support that growth.

“Continued demand will contribute as well. We’ve seen some new sponsors entering the market, and also some additional non-peak perils such as wildfire and others, casualty risk for sure coming in.”

He further explained that the record levels of catastrophe bond issuance seen in the first-half of 2026, has also resulted in some additional broadening of the peril base.

“While U.S. hurricane risk continues to be the major peril, we also saw cat bonds issued for terrorism, parametric earthquake, and precipitation in emerging markets,” Schneider said.

Summing up, he explained that ILS remains an attractive asset class for investors, while providing expanding ranges of reinsurance capital solutions for the re/insurance market and its participants.

“We see the increased capacity with new transactions. As a result of that, a lot of the market is reinvesting those returns back into the ILS space. So we’re seeing cat bond spreads tightening quite a bit, with pricing returning to the levels that we’re lasting in 2021.

“Nevertheless, the risk-adjusted returns remain attractive relative to other asset classes in the market, and we would expect double-digit returns for the ILS space for the fourth consecutive year. Generally, losses have been limited.”