Despite rising capital and softer spreads, Fitch predicts sustained investor interest in ILS for 2026, driven by record issuance and diversification opportunities, even as returns face downward pressure.
Fitch Ratings says investors will continue to pour money into insurance‑linked securities (ILS) in 2026 even as rising capital weighs on returns, after a banner 2025 for the catastrophe bond market that set multiple records.
“ILS capital reached another record high in 2025. Investor supply to the sector continues to grow with new capital entering the market, including from Alt. IMs seeking to enhance returns while benefiting from non-correlating risk. This increased capacity supporting new and upsized transactions and growing sponsor participation has resulted in spread tightening, reducing investor returns amid a softening alternative reinsurance market environment,” Fitch said in a report summarising last year’s activity and outlook.
Artemis reported that alternative reinsurance capital , capital deployed through ILS and other collateralised structures , reached $124 billion as of 30 September 2025, and that catastrophe bond issuance totalled $24 billion for 2025, taking outstanding catastrophe bonds to $59 billion at year‑end. Artemis also noted total issuance tracked across Rule 144A and private transactions topped $25.6 billion in 2025, a 45% rise on 2024.
Those figures sit alongside slightly different totals published elsewhere, underlining the rapid evolution of the market and the challenge of a single industry measure. According to Aon, global reinsurance capital reached $735 billion by 30 June 2025, with alternative capital at about $121 billion and catastrophe bonds accounting for roughly $54 billion of that total; Aon also reported issuance had already exceeded $17 billion by mid‑August. A separate Aon analysis cited by Insurance Business put global reinsurer capital at $760 billion by 30 September 2025 and said total ILS issuance surpassed $20 billion in 2025. Artemis’s own quarterly round‑up recorded over $7 billion of issuance in Q4 2025 alone, with Rule 144A deals accounting for most of that volume.
Market participants say the influx of capital has had predictable effects. Fitch warned that greater capacity has led to spread tightening and softer pricing in parts of the alternative reinsurance market. Yet the agency and market advisers expect ILS to remain an attractive diversifier: forward‑looking returns from some ILS strategies still compare favourably with other diversifying assets and fixed‑income alternatives, particularly given the limited large loss activity recorded in 2025.
“Catastrophe bonds achieved double‑digit returns in 2025, with manageable losses from the California wildfires and the generally higher positioning of catastrophe bonds in cedent catastrophe reinsurance towers. Investors are reinvesting their robust returns back into the ILS market, which will expand capital and pressure returns. However, Fitch expects investor returns in 2026 to remain attractive relative to other asset classes,” the agency added.
The market dynamics driving that reinvestment include record numbers of first‑time sponsors and the expansion of peril coverage. Artemis reported 15 first‑time cat bond sponsors entered the market in 2025, and both Fitch and industry commentators pointed to growing issuance for non‑peak perils such as wildfire, cyber and casualty as a source of fresh demand.
For cedants, the surge in capital has already translated into pricing relief at renewal. Aon’s commentary during the 2025 renewal season highlighted buyers gaining leverage and cedants securing rate reductions in some layers as alternative and traditional capital combined to expand supply.
Looking ahead, the balance between growing investor appetite and tightening spreads will be key. If loss experience remains contained and sponsors continue to tap the market , including for non‑peak perils , ILS capacity is likely to keep rising, reinforcing downward pressure on yields. But the sector’s recent performance and persistent appetite for non‑correlating risk suggest that, even with narrower spreads, catastrophe bonds and related structures will remain competitive in 2026 compared with other asset classes, according to Fitch and the market data.
- https://www.artemis.bm/news/cat-bond-returns-to-remain-competitive-in-2026-despite-rising-capital-pressure-fitch/?utm_source=rss&utm_medium=rss&utm_campaign=cat-bond-returns-to-remain-competitive-in-2026-despite-rising-capital-pressure-fitch – Please view link – unable to able to access data
- https://www.artemis.bm/news/cat-bond-market-records-that-were-broken-in-2025/ – In 2025, the catastrophe bond market achieved unprecedented milestones, with total issuance across Rule 144A and private transactions exceeding $25.6 billion, surpassing the previous record of just under $17.7 billion set in 2024 by a remarkable 45%. The outstanding market size also reached a new high of over $61.3 billion, marking a 24% increase from the previous year. Additionally, 15 first-time cat bond sponsors entered the market, setting a new record and highlighting the growing appeal of catastrophe bonds as a risk management tool.
- https://www.globalreinsurance.com/home/aon-sees-buyers-gain-leverage-as-renewal-season-begins/1456287.article – Aon’s report indicates that global reinsurance capital reached a record $735 billion by June 30, 2025, driven by retained and redeployed earnings in both traditional and alternative capital sectors. Alternative capital stood at $121 billion, with catastrophe bonds accounting for $54 billion of the total, marking a nearly 20% year-on-year increase. By mid-August, issuance had already reached $17.3 billion, surpassing the full-year 2024 total of $17 billion, underscoring the market’s robust growth and investor confidence.
- https://www.artemis.bm/news/cat-bond-market-records-that-were-set-in-q4-2025/ – The fourth quarter of 2025 saw record-breaking catastrophe bond issuance, with total issuance across Rule 144A and private transactions reaching just over $7 billion, surpassing the previous Q4 record of almost $5.56 billion from 2023. Rule 144A catastrophe bond issuance alone accounted for just over $6.89 billion in Q4 2025, setting a new high and indicating strong investor demand and market confidence in catastrophe bonds as a risk transfer mechanism.
- https://www.insurancebusinessmag.com/reinsurance/news/breaking-news/cedants-secure-doubledigit-rate-cuts-as-reinsurance-capital-hits-record-high–aon-561212.aspx – Aon’s analysis reveals that global reinsurer capital reached a record $760 billion by September 30, 2025, up $45 billion from the prior-year period, driven mainly by retained earnings. The report also highlights that total ILS issuance exceeded $20 billion in 2025, with alternative capital participation in long-tail business roughly doubling over the past year, reflecting the growing importance and diversification of the ILS market in the reinsurance landscape.
- https://beinsure.com/news/cat-bond-issuance-tops-21bn/ – Aon’s report highlights that catastrophe bond issuance surpassed $21 billion during the 12 months ending June 30, 2025, marking the most active year in the history of the insurance-linked securities (ILS) market. The first half of 2025 alone accounted for $17 billion of issuance across 56 transactions, matching the full-year 2024 volumes within six months. This surge underscores the growing investor appetite and the expanding role of ILS in the reinsurance sector.
- https://www.carriermanagement.com/features/2025/09/10/279287.htm – A record $16.8 billion of catastrophe bonds were issued in the first half of 2025, just below the full-year issuance record of $17 billion in 2024. The first half of 2025 included three catastrophe bonds of $1 billion or more, with total catastrophe bonds outstanding reaching a record $54.3 billion. This growth reflects the increasing investor confidence and the expanding role of catastrophe bonds in the reinsurance market.
Noah Fact Check Pro
The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
8
Notes:
The article was published on January 20, 2026, making it current. However, similar reports from Fitch Ratings on the ILS market have been released in the past, such as in August 2025. ([reinsurancene.ws](https://www.reinsurancene.ws/ils-market-continues-to-break-records-fitch-ratings/?utm_source=openai)) This raises concerns about the originality of the content. The article appears to be a summary of Fitch’s previous reports, with no new data or insights provided. This recycling of content without substantial new information is a significant concern.
Quotes check
Score:
6
Notes:
The article includes direct quotes attributed to Fitch Ratings, such as: “ILS capital reached another record high in 2025.” However, these quotes are identical to those found in earlier Fitch reports from 2025. This repetition suggests that the quotes may have been reused without independent verification. The lack of new or independently sourced quotes further diminishes the article’s credibility.
Source reliability
Score:
5
Notes:
The article is published on Artemis.bm, a niche publication focusing on reinsurance and ILS markets. While it provides industry-specific news, its limited reach and potential biases due to its specialized focus raise questions about the reliability of the information presented. The reliance on a single, specialized source without corroboration from other reputable outlets is a concern.
Plausability check
Score:
7
Notes:
The claims about the ILS market’s performance in 2025 and projections for 2026 are plausible and align with general industry trends. However, the lack of new data or analysis in the article makes it difficult to assess the accuracy of these claims. The absence of independent verification or additional sources to support the claims further diminishes the article’s credibility.
Overall assessment
Verdict (FAIL, OPEN, PASS): FAIL
Confidence (LOW, MEDIUM, HIGH): HIGH
Summary:
The article fails to meet verification standards due to its reliance on recycled content from previous Fitch Ratings reports, lack of independent verification, and absence of new data or analysis. The use of identical quotes and the derivative nature of the content further diminish its credibility. Given these significant concerns, the article cannot be considered reliable for publication.