Coming off an impressive year for the catastrophe bond market, which saw a number of new annual records set, investors are reinvesting their robust returns back into the insurance-linked securities (ILS) space, which according to Fitch Ratings, will further expand capital and pressure returns throughout 2026.
In a new report, Fitch said: “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.”
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