ILS capacity reaches record $107bn in 2024: AM Best

A recent report by AM Best, in collaboration with Guy Carpenter, reveals that the insurance-linked securities (ILS) market has reached a record-breaking capacity level of USD 107 billion by the end of 2024, driven by retained earnings and new capital inflows.

This growth was further bolstered by two consecutive years on which the ILS segment did not incur any material catastrophe losses.

Once again, the report highlighted, cat bonds saw the greatest growth within the segment, capacity in the 144A nat cat bond market exceeding USD 45 billion by year-end 2024.

“ILS managers believe that the strong returns in the cat bond segment may intensify the appetite of investors for other forms of ILS,” said Matt Tuite, director-ILS, AM Best.

The strong growth of the bond segment has also led to notable developments in other ILS components..

According to the report, sidecar capacity has expanded, now estimated to range between USD 8 billion and USD 10 billion.

Conversely, industry loss warranty capacity has remained relatively stable, hovering between USD 5 billion and USD 7 billion.

Additionally, collateralized reinsurance capacity is estimated to be between USD 45 billion and USD 50 billion. ILS managers are optimistic about future growth in this area, buoyed by two consecutive years of robust investor returns.

At this year’s January 1st renewals, property catastrophe capacity exceeded demand, which led to overall risk-adjusted rate decreases.

The report also references the Guy Carpenter Global Property Catastrophe Rate-on-Line Index, which reflects the result of the capacity supply and demand dynamics at January 1st.

That index fell by 6.6% at the January 2025 renewals, which compares to close to 30% increase two years ago, at a time of soaring demand and muted supply.

“Retro capacity was widely available, coming off another essentially loss-free year, so those deals tended to see larger rate decreases, in the 10% to 20% range,” said Wai Tang, senior director-ILS, AM Best. “Capacity was also plentiful in the upper layers of reinsurance towers typically covered by cat bonds, a trend signaled in the pricing and sizing of cat bond deals during 2024.”

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