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Casualty demand stays strong in insurance-linked securities as property softens

Ledger Investing says casualty ILS investors are increasingly treating casualty as a separate allocation sleeve, which it estimates could add about 4% of capacity without cutting property cat budgets.

Reported · Written up by our desk · Reinsurance

Against a softening property catastrophe market, casualty remains the most discussed alternative within the insurance-linked securities, even as deals are harder to close, according to Ledger Investing’s recently published mid-year 2026 report.

Ledger Investing said capital is actively seeking diversification and that casualty rate adequacy is holding, supported by social inflation that continues to back primary rates. The firm also cited broker reports indicating casualty reinsurance pricing stayed broadly stable through the 2026 renewals.

The report noted that new casualty ILS and sidecar structures brought additional capacity during 2026 renewals. It also pointed to a shift in investor behavior, with investors that previously focused mainly on property cat beginning to treat casualty as a separate sleeve, isolating it from existing 2% to 4% ILS budgets.

Still, Ledger Investing said casualty ILS faces significant execution hurdles, citing factors such as multi-year investor commitments, bespoke collateral, loss ratio cap negotiations, and non-standardized templates. The firm also said investors typically require third-party actuarial review of full cash-flow models because tail risk can extend for years, referencing adverse reserve development across the insurance industry and the prevalence of books running above 100% combined ratios.

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