Global ILS expansion presents strategic capital opportunity for APAC: Howden Re

Ahead of the Singapore International Reinsurance Conference (SIRC), executives from Howden Re and Howden Capital Markets & Advisory (HCMA) emphasized that regional cedents should incorporate alternative capital into their broader toolkits to negotiate deeper partnerships and maximize optionality as reinsurers seek growth across Asia-Pacific (APAC).

In a commentary published ahead of the SIRC event, Howden Re’s Andy Souter, David Flandro, Nena Atkinson, and HCMA’s Bill Cooper discussed how reinsurance capital has drastically changed shape in recent years, with institutional investors, private credit, and ILS funds now backing vehicles from catastrophe bonds and sidecars to new Lloyd’s syndicates.

While much of this activity remains centered in London and the United States, Howden Re argues it is already actively shaping the capacity, pricing, and partnerships available to cedents across APAC.

The sharp rise in alternative reinsurance capital, so that deployed through insurance-linked securities, accounts for much of the scale of the shift.

“Reinsurance capital has become much more diverse, with alternative capital now accounting for close to a quarter of the sector’s total capital base. Dedicated reinsurance capital is now well north of US$500bn, following a period of very strong sector profitability,” commented Nena Atkinson, Associate Director, Howden Re Strategic Advisory.

Atkinson also underlined how the catastrophe bond market sits in the centre of that change.

“Cat bonds are now a structural part of the market, and issuance continues to set new records in 2026,” Atkinson said.

Last year, catastrophe bond issuance surpassed $20 billion for the first time, setting a record of $25.6 billion.

2026 has also been another exceptional year so far for the cat bond market, as total nine-month 2026 issuance managed to reach a new $18.9 billion high of risk capital. 

As we’ve alluded to in previous articles, with the cat bond market pipeline steadily building for the fourth-quarter of 2026, Artemis is already tracking what will mark only the second year where issuance of 144A catastrophe bonds and private cat bond deals has exceeded the $20 billion level. 

Analyse the catastrophe bond market using our charts and visualisations, which are kept up-to-date as every new transaction settles.

Bill Cooper, Managing Director, Howden Capital Markets & Advisory, also underlined how investors are consistently reaching further across the market to expand their capital base.

“Financial investors are now providing risk capital to a wider range of insurance vehicles and classes, in the form of sidecars and other structured capacity vehicles, such as reinsurance syndicates at Lloyd’s,” Cooper explains.

The executives also emphasised that institutional and private capital is primarily entering the market  through ILS and collateralised or private arrangements, with diversification being a large part of the appeal.

David Flandro, Head of Industry Analysis and Strategic Advisory, added: “One attraction of ILS is that returns are broadly uncorrelated with broader financial markets. Property cat remains the main focus, although there is growing appetite across other perils and geographies, including casualty, specialty, cyber in particular, and APAC.”

That diversification still has plenty of room for growth, as more than half of ILS deals in the market cover the US exclusively, while only 11% cover non-nat-cat perils.

Importantly, Howden Re and HCMA acknowledges that the Lloyd’s market has also become a focal point for this capital as well.

“Financial investors of various sizes and types have been very active in providing capital to businesses underwriting at Lloyd’s. There have been several high-profile examples of investors financing structured capacity vehicles such as reinsurance syndicates, but we have also seen an increasing number of credit and other private investors backing a range of syndicates,” explains Cooper.

The syndicates themselves are continuously evolving, with Cooper emphasising the formation of multiple new Lloyd’s syndicates designed to facilitate single-cedent outwards reinsurance.

However, this shift is what presents a key opportunity for APAC insurers and investors.

“Lloyd’s is keen to see new proposals where the underlying risk broadens the footprint of the market, especially by geography. We believe this is a real opportunity for APAC insurers and investors,” Cooper added.

This shift will fundamentally change how reinsurers view and approach the APAC region going forwards.

Providing further clarity, Andy Souter, Managing Director, Head of APAC, Howden Re, stated that this will sharpen reinsurers’ focus on maintaining relevance and help re-evaluate the value they add to cedents.

“As reinsurers seek growth opportunities, and ‘replacement demand’ for business lost to third-party capital, APAC will be a source of interest. It is a region where reinsurers typically assess that they are underweight, and where third-party capital use may be more tempered than elsewhere. That creates a drive to stay relevant and grow with clients in the region,” Souter continued.

Interestingly, Souter also urges insurers to consistently keep track of the developments that form parts of a longer-term shift in how institutional capital participates in reinsurance, along with the opportunities this creates for alternative solutions.

Foremost, the executive underlines the importance of not disregarding this development.

“The default reaction shouldn’t be ‘not relevant to APAC’. The question is how we can use this capital as part of the capital toolkit, and how to balance various sources of capital to achieve optimal reinsurance and maximise optionality through the market cycle,” Souter said.

This necessitates guidance encompassing both traditional capacity and alternative capital sources, integrating insight into global market developments with regional knowledge.

Reinsurance pricing is consistently softening, and the relatively benign loss environment this year has supported further capital growth across both traditional and alternative sources, which Flandro states adds to supply during a time where demand has not increased to the same extent.

However, higher risk premia in the capital markets provide an important counterweight and should, in theory, support a higher pricing floor. In the Asia-Pacific market, buyers are taking advantage of this situation to negotiate deeper strategic partnerships with reinsurers.

“It is early days, but at a high level this should serve as a platform for exploring the best form of partnership with reinsurers. Not just terms and conditions, but strategies to maximise reinsurer relationships,” Flandro added.

Prospectively, Atkinson sees the growth of alternative capital as structural, even if its deployment proves more cyclical. The ILS market has grown for roughly 15 years and is now viewed across the market as being an integral part of most cedents’ programme structures.

“The exceptionally profitable period of the last few years has attracted capital into both the ILS and traditional sectors, and we are now seeing more capital chasing growth as pricing falls. A concern would be a situation where too much capital is chasing deployment and investors become less disciplined on price and risk selection,” Atkinson said.

At the upcoming January 2027 renewals, Howden Re states that the additional capacity will add to an already well-supplied market and could also influence where pricing sits and how long the softening market lasts.

“We still expect the pricing floor to be higher than in 2017, given higher interest rates, inflation and risk premia,” Atkinson added.

“The capital reshaping reinsurance may be concentrated in London and the US, but its effects reach every region. For APAC insurers, understanding it is the first step to using it well, whether through new forms of capacity, deeper reinsurer partnerships or greater optionality through the cycle,” Howden Re said.