In its recently published whitepaper, Cohen & Company Asset Management, the fixed income financial services investment specialist, explained that due to advances within structuring, analytics, and governance, combined with growing investor familiarity, the firm believes that casualty represents “the next evolution of ILS exposure.”
“Historically, most ILS capital has supported insurers’ property coverage, particularly policies in regions exposed to catastrophic risk such as coastal Florida. However, driven by advances in structuring, analytics, and governance— combined with growing investor familiarity—we believe casualty represents the next evolution of ILS exposure,” Cohen & Company’s paper explains.
“For investors, we believe casualty ILS offers the potential for private-equity-like returns along with meaningful diversification versus traditional investments—both equity and fixed income—as well as diversification to catastrophe-focused ILS.
“For these reasons, we expect casualty ILS to scale significantly in the coming years as sponsors standardize investment structures, enhance data transparency, and align duration and commutation features with investor mandates.”
Throughout the past three decades, the ILS market has expanded significantly, largely thanks to a combination of strong investor returns and growing sponsor and investor confidence.
“By mid-2025, alternative capital in the ILS market reached an estimated $121 billion, reflecting continued growth and strong investor demand. Issuance activity accelerated alongside expanding sidecar structures, creating scalable, collateralized channels for casualty portfolios and signaling the market’s readiness to support longer-duration risks,” Cohen & Company said.
While property catastrophe remains the dominant area within the ILS market, the increasing use of sidecars and diversified quota shares, beyond short-tailed exposures, clearly demonstrates the market’s readiness to expand towards longer tailed risks.
As Cohen & Company outline in their paper, casualty ILS builds on the same principles of collateralization and transparency, but applies them to liability-driven portfolios, which therefore offers steadier cash flows and reduced climate sensitivity.
“This evolution reflects a natural progression: from event-driven property risk to structural solutions for casualty, enabling investors to capture underwriting margins across multiple years while maintaining diversification benefits.”
Further into the paper, analysts highlighted how the casualty ILS space presents a number of key benefits to both investors and insurance sponsors.
Cohen & Company specifically highlighted that for investors, casualty ILS offers attractive risk adjusted returns and a low beta compared to traditional asset classes. By opting to integrate casualty ILS into a portfolio, investors can enhance diversification and improve overall portfolio efficiency.
The firm also states that casualty ILS offers sponsors access to additional sources of capital, mitigates counterparty credit risk via complete collateralization, and facilitates capital optimisation, all while permitting the sponsor to maintain underwriting control.
Furthermore, Cohen & Company highlights how the casualty ILS market is building on established precedents, including early workers’ compensation and motor liability securitisations, and is now particularly focusing on repeatable frameworks that meet institutional standards for transparency and governance.
“Advancements in risk modeling, actuarial analytics, and structuring techniques have made it more feasible to transfer long-tail risk to capital markets,” the firm said.
Moving towards reinsurance sidecars and quota shares, both of which are key components of the casualty ILS space, analysts noted that these both create a credible pathway for casualty ILS to become a core allocation within alternative risk portfolios.
“For cedents, these structures deliver capital efficiency, volatility management, and diversification of capacity sources beyond traditional reinsurance. For investors, they provide access to seasoned underwriting platforms, low correlation to macro cycles, and attractive risk-adjusted returns, positioning casualty ILS as the next growth engine in the ILS market.”
As we reported throughout last year, a number of new casualty sidecars were launched or expanded in the latter half of 2025, with key players like Ascot, MultiStrat, and Enstar involved.
Momentum also continued into 2026 as reinsurer QBE Re secured over $550 million in fully collateralised quota share reinsurance through its George Street Re casualty sidecar.
To conclude, Cohen & Company said that casualty ILS is at an “inflection point,” while highlighting that although the current market size is still modest, structural improvements are accelerating adoption.
“Standardized documentation, enhanced data quality, and emerging liquidity solutions are reducing friction for both sponsors and investors. These developments address historical barriers around transparency and exit options, creating a more investable framework for institutional capital.
“Momentum is reinforced by macro trends. Alternative capital reached new records by mid-2025, and brokers report growing appetite for longer duration risk. As casualty pricing hardens and carriers seek capital efficiency, demand for collateralized solutions will deepen. Early transactions will set performance benchmarks; once confidence builds, casualty ILS can transition from niche allocation to a recognized pillar of alternative capital, reshaping liability risk financing for the next decade.”
