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Schroders Capital points to ILS growth as nat cat risk rises

Schroders Capital says insured losses are climbing as insurance capacity tightens, shifting catastrophe risk beyond traditional insurers toward capital markets.

Reported · Written up by our desk · Reinsurance

Schroders Capital says the need to manage and mitigate natural hazard risk is creating “strong opportunities” for investors through insurance-linked securities and other risk-transfer markets, including broader securitisation.

In a new report, the firm links the shift to rising insured losses from natural catastrophe events and growing constraints on insurance capacity, saying that catastrophe risk is being redistributed across households, lenders, capital markets, institutional investors and governments.

Schroders Capital also attributes part of the increase in financial impact to higher economic exposure, noting that more assets and individuals are in coastal and other exposed regions, alongside higher construction costs driven by labor and material inflation. The firm adds that climate-induced hazard changes further amplify the trend.

The report argues that improving physical climate risk management depends on aligning how risks are quantified and interpreted, using probabilistic, distribution-based assessments with explicit acknowledgement of uncertainty. It also highlights innovation in catastrophe modelling, including a stronger case for private data ecosystems such as satellite imaging and sensor networks, and says capital markets are increasingly viewed as both a way to absorb losses and finance adaptation and resiliency.

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