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AM Best sees third-party reinsurance capital rising on ILS returns
AM Best raised its end-2025 estimate for third-party reinsurance capital to $123 billion, projecting growth to $130 billion by end-2026.
AM Best said strong performance in the insurance-linked securities market has helped sustain and expand investor allocations to third-party reinsurance capital, making it a more important component of global reinsurance capacity.
The rating agency and reinsurance broker Guy Carpenter lifted their end-of-2025 estimate for third-party reinsurance capital from $120 billion to $123 billion, and projected it will rise further to $130 billion by the end of 2026, supported by demand for catastrophe bonds and other ILS products.
AM Best pointed to momentum in catastrophe bond issuance. After record-breaking 2025 144A issuance of $25.6 billion, the first half of 2026 set a new first-half record, with nearly $18 billion issued, bringing the total outstanding ILS market size to about $65.6 billion at the end of June.
The agency also cited risk-adjusted return strength, diversification benefits from insurance risk, and “recycling” of investor capital as part of the ILS appeal, along with reinsurers benefiting from maturing partnerships with alternative capital providers that help them exceed capital costs, according to Artemis.