2025 has seen continued growth within the alternative capital markets, supported by steady expansion across property catastrophe and casualty lines, along with increased capital flowing into catastrophe bonds and collateralized reinsurance transactions, greatly reflecting investor confidence, according to Artex Risk Solutions.In its Fall 2025 state of the market report, executives from Artex noted, “the upward trajectory of both ILS supply and demand has propelled this market to new highs in 2025.With mid-year Cat Bond and related ILS issuance surpassing last year’s record, the market is on track to achieve its USD20 billion a year milestone.Both new and returning sponsors are driving issuance activity.” With additional transactions settled in the fourth-quarter so far, .

As a reminder,  Moreover, Artex also highlighted how losses that stemmed from the January California wildfires have had a minimal impact on the market, with investors continuing to show appetite for the peril.“With the bulk of losses retained within traditional reinsurance markets, Sidecars and private transactions were the capital market-backed vehicles hit hardest by the California wildfire losses,” Artex writes.The firm continued: “While more traditional asset classes have had a volatile year, the ILS market continues to deliver attractive yields to investors while remaining uncorrelated with more traditional investment markets.” Executives particularly highlighted how property catastrophe risk continues to heavily dominate the market from an investor perspective; while casualty interest hit a “tipping point” in 2025, both in terms of issuance activity and investor interest.

Executives stated that both the softening commercial property insurance market, as well as rising loss severity within casualty classes, are contributing factors towards this shift.Moreover, Artex acknowledged how investors are drawn towards reinsurance sidecars for casualty exposure, primarily because they’re structured to better manage the harder-to-model, long-tail nature of these risks, while still providing a clear timeline for when capital comes back.“Newer features, such as the forward exit option, which allows investors to exit their position after a predetermined time period, are one of the primary reasons these transactions are on the rise.

The “tail” of the transaction is typically taken back by the sponsor of the sidecar or transferred to a run-off market on pre-agreed terms (forward exit option),” Artex writes.Adding: “From an investor perspective, casualty offers a different type of profile than property.Typical investors are those seeking to profit from both the underwriting return and the asset management returns on the premium received throughout the transaction.

In particular, private credit funds are finding casualty sidecars to be an attractive market in 2025.” Turning attention towards cyber; nearly three years on from the issuance of the first publicly offered cyber catastrophe bond, cyber remains a line where interest within the reinsurance and ILS markets diverges.“Although a concern for many insurers, Artex has not yet seen the demand, structure, modeling, pricing and return profile gain widespread interest from capital markets,” executives noted.So far in 2025, we’ve only seen one cyber cat bond come to market, with Beazley’s  issuance, which is yet to be priced.

Moving forward, Artex also acknowledged how Lloyd’s London Bridge 2 insurance-linked securities (ILS) structure, for which Artex Capital Solutions provides the insurance management services for, “This milestone reflects growing investor confidence and the platform’s effectiveness in enabling efficient risk transfer and continued potential for the future of the UK ILS regime,” Artex explained.The firm also noted that the UK’s Risk Transformation Regulation is expected to enhance the UK’s ILS framework through regulatory changes for both ILS and insurance special purpose vehicles (ISPVs).Recall that the Prudential Regulation Authority (PRA) of the Bank of England on how the UK’s ISPV or ILS structures can play a role towards bringing in alternative capital to support life risks and reinsurance in the UK.

“Current requirements require ISPVs to fully fund their aggregate maximum risk exposure at all times.Other changes that will make the UK ILS market more competitive include a grace period for certain compliance and funding requirements, as well as a faster authorization process,” Artex writes.Kathleen Faries, Chief Executive Officer, Artex Capital Solutions, commented: “Throughout 2025, Artex has experienced a very healthy pipeline of interest in the asset class, both in new collateralized reinsurance set-ups as well as growth in existing vehicles.

We have seen good growth across property Cat as well as casualty lines.“The reinsurance sector has shown good underwriting discipline and discernment in recent years.This has kept the returns in a territory that holds investor interest in the asset class.

Investor confidence is in large part dependent on a disciplined and profitable reinsurance market.“This year’s increase in capital backing Cat Bonds and collateralized reinsurance transactions reflects that confidence.”.All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.

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