A recent survey of insurance-linked securities (ILS) investors conducted by reinsurance broker Gallagher Re and Gallagher Securities reveals a notable rise in market appetite for 2026. The findings indicate that a clear majority of both specialist and generalist allocators intend to expand their exposure to insurance-related assets over the next two years.
In a recent article authored by Jason Bolding, global head of ILS at Gallagher Re, and Ben Lyon, CEO of Gallagher Securities UK and head of Capital Advisory for Gallagher Re, both executives highlight how the market for ILS and structured insurance investments has gotten off to a busy start to 2026.
Bolding and Lyon also acknowledged how in 2023, the index return from ILS investments was around 14%, while last year, it sat closer to 11% and may ease further.
“At the same time, investors’ choices are expanding rapidly beyond cat bonds, with growing opportunities for sidecar structures and structured debt and equity deals, offering varying degrees of trade-off between liquidity and returns,” the authors said.
Jason Bolding, global head of ILS at Gallagher Re, commented: “This is a unique moment: Capital conditions are favorable, investor appetite is strong and structures are evolving. The opportunity is to build relationships now that will matter when conditions tighten.”
To gauge the mood among ILS investors in early 2026, both Gallagher Re and Gallagher Securities, the firm’s ILS and capital markets broker-dealer division, carried out a survey to gather investor perspectives, supplemented by insights obtained from a series of discussions with expert allocators.
“We drew on our extensive relationships with both specialist investors in insurance-linked securities, such as ILS funds, and more generalist asset managers across the private equity and private credit markets, who invest in ILS alongside a broader range of asset classes,” the authors explained.
They engaged with over 60 investors collectively, and the majority of respondents were senior-level individuals, with 94% possessing direct authority over allocation decisions. Their firms are of institutional scale, with more than 70% overseeing assets exceeding $1 billion, and 16% managing assets surpassing $100 billion.
While the results from the survey are set to be published next month, to offer a view in the meantime, the authors emphasised that responses show that investor appetite is both increasing and becoming more sophisticated.
As mentioned, a clear majority of investors also indicated that they plan to increase their exposure to insurance-related assets over the next two years, while almost none plan to reduce it.
The survey also indicates that catastrophe bonds are likely to continue as the mainstay of the ILS and alternative capital markets, with investors highlighting their liquidity, transparency and scalability.
However, Bolding and Lyon stressed that allocators have many other options available to them as well.
“Significant numbers of investors are now exploring vehicles such as reinsurance and insurance sidecars – structures that allow investors to take on a share of insurers’ underwriting risk, typically for a specific portfolio of policies. Sidecars have been of growing interest to cedants as an alternative route to reinsuring casualty lines in recent months, for example, in contrast to bond markets that remain largely focused on property catastrophe risk,” the authors said.
“From the investors’ point of view, sidecars are less tradeable than cat bonds, but they attract a narrower pool of more expert investors, who can therefore earn a “complexity premium.”
Moving forward, a significant minority of respondents from the survey also showed interest in making direct portfolio investments in insurance companies through buying either their equity or their debt.
Ultimately, this can offer greater control, for example, over managing the assets associated with insurance liabilities, but dilutes pure exposure to the underwritten risks.
The authors added: “Part of the appeal is that insurance is not a sector that is averse to consolidation. One investor told us: “If you (as an investor) own a good company, there is a decent chance that a bigger company likes your good company, and as a result you can sell it. We do like sectors where there is good liquidity for the companies you own.”
Bolding and Lyon also noted that as ILS and alternative capital continues to grow and develop, investors are showing both pragmatism and nuance.
However, as always, their anticipated returns vary significantly based on the types of vehicles they choose to invest through, as well as their personal tolerance for complexity.
Ben Lyon, CEO of Gallagher Securities UK and head of Capital Advisory for Gallagher Re, said that, in the round, investors are looking for more than simple exposure to the insurance market.
Lyon said: “What they want is a curated, thoughtful and creative way to match their capital with risks that sits at the efficient frontier of complexity, duration and profitability. There are generic ways to get exposure to the insurance market, but the way a lot of alternative capital makes money is through bespoke and complex structures that only certain investors will want to consider.
“While the industry is awash with third-party capital, the people that make excess returns are the ones who really spend their time thinking about how to structure a deal.”
The authors concluded: “For senior insurance leaders and ceded reinsurance buyers, the question today is not simply one of securing capacity, but of identifying the right capital, structured in the right way, to deliver resilience, efficiency and sustainable growth across the market cycle.”
