According to the latest projection from rating agency AM Best and broker Guy Carpenter, third-party capital deployed in reinsurance is anticipated to grow by almost 7% this year, projected to end the year at a new high of $114 billion.Third-party capital, that largely represents the capacity deployed by insurance-linked securities (ILS) fund managers and through other ILS structures into reinsurance opportunities, was .That represented 7% growth over the course of that year and AM Best and Guy Carpenter feel that level of growth is being sustained by the ILS market.

Aon and Guy Carpenter project that global dedicated reinsurance capital will grow almost 7% to around $649 billion by the end of 2025.Traditional reinsurance capital is projected to expand 7%, as reinsurers continue to reap the benefits of still-firmer pricing and high levels of retained earnings.Third-party capital, so largely the capital deployed by ILS investors and specialist ILS fund managers, is seen as growing just under 7% through 2025, to reach its new $114 billion high.

These projection figures for 2025 capital levels in reinsurance are based on there not being any outsized catastrophe loss events over the rest of this year, AM Best explained.AM Best noted that, “The expansion of the ILS segment is primarily due to investor appetite for robust returns and well-defined remote risks.” For traditional reinsurers strong capital growth was, “buoyed by strong retained earnings and limited capital erosion from catastrophe activity,” AM Best said on 2024.Adding, “This capital growth occurred in the absence of major new reinsurance start-ups, a stark contrast to past hard markets that typically saw an influx of new entrants following capital-depleting events.

Instead, established reinsurers retained earnings and optimized balance sheets, signaling greater capital stewardship.” Even with more catastrophe activity in early 2025, AM Best noted that “elevated attachment points and greater selectivity,” have helped reinsurance capital avoid large loss impacts, helping to ensure sector capital has continued to build.According to the projection, third-party reinsurance and ILS capital is set to remain stable at just under 18% of dedicated reinsurance capital, cementing the importance of this complementary capacity source for the insurance industry as 2026 approaches.It’s worth noting that broking group , which was a stable level from the end of 2024. We expect Aon’s figure for ILS capital in reinsurance as of the mid-year may rise, once that becomes available.

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