At AM Best’s Europe Insurance Market & Methodology Briefing in London this week, analysts noted that insurers and reinsurers are managing capital more efficiently, with the growing role of insurance-linked securities (ILS) emerging as an increasingly important alternative capital strategy for risk management.During the event held on November 6th 2025, Timothy Prince, Director, Analytics for London at AM Best, directly addressed the complexity of market cycles, stating: “Market cycles are complicated.It’s not just capital driving market cycles.So, there are other things to think about.” He continued: “We’re seeing companies manage capital more efficiently, and we’re seeing the use of lots of other types of capital, and they’re becoming increasingly complex themselves.” Expanding on this, Eli Sanchez, Director, Analytics for Amsterdam at AM Best, discussed alternative capital sources, emphasizing that “traditional alternatives to capital remain relevant” and are “part of the solution that companies employ.” Highlighting ILS in particular, Sanchez said: “One that we find particularly interesting is the ILS market, which has really been growing across these years.

Right now, it has reached around $121 billion by mid-2025.It’s important to note that cat bonds play an important role and that they represent about 40% to 45% of that composition.” Recall, that Aon Securities recently said that Sanchez continued: “The benefit of having this kind of instrument is to upload a big risk that other companies can have without diligent equity, of course, that’s the main reason to explore that consideration to the balance sheet.“Also, you can access third capital efficiently and maintain underwriting control.

For the investors, they have a very good use.They don’t have to invest in an insurance company, and it provides diversification from traditional assets.So, in that sense, I think asset managers are exploring that alternatives can turn into these kind of investments.” Later on in the session, discussion turned towards casualty ILS, which continues to emerge as a major segment within the growing ILS market.

However, the subject of whether casualty ILS is sustainable in the medium to long term was debated by both Prince and Sanchez.“That’s a complicated question, because there’s also the litigations that are always coming, and there’s also some new risks that are coming.I think that’s a matter of market participants really, and the way those instruments are placed in the market.

At the end, solutions have been found.So, I think sustainability is going to depend on the appetite of the market,” Sanchez said.“I think I’ve seen four or five casualty sidecars in the last few years, and before that I hadn’t seen any.

I think the question is what happens at the end? Because they’re open for a few years, closed for then four or five years, and then somehow have to pass that risk back to the originating insurer most of the time,” Prince added.He continued: “So, I don’t think I’ve really seen that happen yet, so I think the question will be how successful that is, and if they do that, well, then I don’t see why not.There’s capital there, there’s collateral there, there’s people interested in it.

“Typically, with casualty markets, the argument is sometimes the best time to do casualty is when no one else wants to do it.And it’s a hard market at the moment, so who knows.”.All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.

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