Category: Reinsurance brokers and structures · Reviewed by Mark Fox, Broker · Renewals · Last reviewed 2026-06-05
Insurance-linked securities (ILS) are financial instruments whose performance is linked to underlying insurance or reinsurance loss experience. ILS provide alternative capital to the insurance market — additional capacity beyond traditional insurance and reinsurance balance sheets — and have grown to approximately $100bn of outstanding capital globally.
Category: Reinsurance brokers and structures Also known as: ILS, alternative capital Related concepts: catastrophe bond, sidecar reinsurance, collateralised reinsurance
The principal ILS structures are:
ILS investors include dedicated ILS funds (Nephila, Stone Ridge, Credit Suisse ILS), hedge funds, pension funds and sovereign wealth funds. ILS returns are generally uncorrelated with broader financial market returns, making ILS attractive as portfolio diversifiers.
UK ILS structures are regulated under the Risk Transformation Regulations 2017 [1] as insurance special purpose vehicles, with a fast-track PRA authorisation regime. The London ILS market remains comparatively small relative to Bermuda and Cayman Islands but has grown following the UK regime’s introduction.
Offshore ILS frameworks include the Bermuda Insurance Act 1978 (segregated accounts), Cayman Islands Insurance Law and the Ireland ILS regime.
ILS issuance is concentrated at the major renewal periods (1 January, 1 April, 1 June). Sponsoring cedants engage specialist ILS arrangers (Aon, Guy Carpenter, Howden Tiger and specialist firms) to structure and place the issuance.
The ILS market is a critical component of the global catastrophe reinsurance market. ILS capital provides approximately 15–20 per cent of global property catastrophe reinsurance capacity. ILS capital can be both more responsive (entering the market quickly when prices are attractive) and more skittish (withdrawing quickly after large losses) than traditional reinsurance capital.
An illustrative example: at the 1 January 2024 renewal, approximately $15bn of new catastrophe bond issuance was placed, complementing approximately $35bn of outstanding cat bonds and $50bn of collateralised reinsurance and sidecar capacity. The total alternative capital contribution to the global reinsurance market was approximately $100bn — approximately 15 per cent of total reinsurance capital.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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