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ILS capacity hits new highs as reinsurance pricing softens
AM Best said ILS supply is estimated to exceed demand by more than 25%, helping push mid-year reinsurance pricing lower as catastrophe bond issuance sets records.
A new AM Best report ahead of the rating agency’s pre-RVS 2026 review points to continued growth in insurance-linked securities capacity, saying it has reached new highs as expansion outpaces traditional reinsurance capital. Market participants cited that ILS growth as a factor behind softer reinsurance pricing at mid-year renewals, with catastrophe bond transactions in the first half of 2026 routinely oversubscribed. AM Best also noted that investors have had strong ILS and reinsurance returns over the prior three years, leaving many capacity providers flush with capital. The report highlights that catastrophe bonds and broader ILS issuance momentum continued into the second quarter, with more than $11.3 billion issued across a quarterly record 48 transactions, according to the Artemis Q2 2026 Catastrophe Bond and Related ILS Market Report. It also said the 144A property cat bond market posted another first-half issuance record, totaling $17.3 billion. AM Best added that a high volume of maturing cat bond capital and retained earnings were redeployed into current-year issuances, along with new capital flowing into the market. Matt Tuite said the supply of capital was estimated to surpass demand by over 25%, driving further declines in reinsurance pricing.